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The industry should consider developing products that allow first-time buyers to tap into the equity locked in their parents' homes. This was the conclusion of research conducted by Peter Williams for the Building Societies Association on what the mortgage market will look like in 2020. Current propositions involve guarantors and cash contributions but Williams says some lenders allow parental income and assets to be included when considering their children's credit profile. The products work like second charge mortgages, where the money raised underpins the purchase.

The industry should consider developing products that allow first-time buyers to tap into the equity locked in their parents' homes.

This was the conclusion of research conducted by Peter Williams for the Building Societies Association on what the mortgage market will look like in 2020. He presented his findings in London last week.

Williams, executive director of the Intermediary Mortgage Lenders Association, says there is a case for parents to use equity from their properties towards deposits for their children's first homes.

Current propositions involve guarantors and cash contributions but Williams says some lenders allow parental income and assets to be included when considering their children's credit profile.

The products work like second charge mortgages, where the money raised underpins the purchase.

He says: "We're in an important part of the cycle now in terms of the rise in home ownership. We have seen 30 to 40 years of locked-in growth which means there are a large number of parents who are mortgage-free.

"The questions for the industry are how that can this be exploited by children and how could that be incentivised?"

He adds: "There are children who are income-rich but asset-poor while their parents are asset-rich and income-poor. We need to think about how we can combine the two."

But David Hollingworth, mortgage specialist at London & Country, who attended the research presentation, has reservations about the idea.

He says: "We must not keep putting the parental home at the centre of every solution. It's easy for us to talk about parental equity as the solution for children to get on the housing ladder but we're equally talking about it being the solution to bolstering their income.

"We could end up squeezing from both sides, leaving parents thinking that they're going to be carrying a lot of debt over a long period."

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