Parents are being warned of the effects of providing financial help to their children as a bid to assist them with climbing the property ladder, it has been revealed.

According to the Law Society, parents should be “cautious” when it comes to lending or giving their children a loan to help purchase a home.

With the great slump in house prices, a large number of first time buyers are showing more interest in the property ladder.

Statistics have found that nearly eight out of ten first time buyers in London alone are relying on their parents for finances and interest free loans as bank loans and mortgages become harder to get.

As more parents assist their children by providing them with cash for deposits on their homes, president Paul Marsh of the Law Society said that the move could be “fraught with difficulties.”

He said: “People don’t think through the consequences or take appropriate advice. There’s a very big difference between giving or lending to your daughter if she is getting married or starting up a home with a partner. But you need to be cautious in both instances.”

He advised that if parents are assisting their children with a loan, they should sign a legal document “to prevent confusion and distress if circumstances changed.”

“The document doesn’t have to be complicated. It can be a very clear and simple statement of effect, so long as it is signed by all the parties,” he added.