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Interest charged on loan claims made through 'bank of mum and dad'

While many people may borrow money from their parents to avoid bank charges and other expenses involved in loan claims, many mothers and fathers expect interest to be paid on these debts.

Research from HSBC found that while 19 per cent of first-time buyers (FTBs) in the last year  received some cash from their parents, 52 per cent of the family members who provided the money expect it to be paid back.

Also, 73 per cent of these individuals wish to receive some interest on the debt as well, with common rates ranging from 2.1 per cent to 2.5 per cent.

Only 31 per cent of families who provided FTBs with financial assistance gave outright cash gifts, while 17 per cent requested part-ownership in the real estate.

"Family support has become an important part of the first-time buyer financing mix," HSBC head of mortgages Peter Dockar said, adding: "It is best to agree the terms with family members at the outset."

Charles Baker
Charles is a reputed financial analyst with decades of experience under his belt. ADNFCR-2776-ID-801473653-ADNFCR



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