GROWING numbers of middle class parents in East Anglia are using their savings to help buy homes for their children, it emerged last night.Property experts said dwindling returns on savings thanks to low interest rates was persuading parents to make long-term investment in the housing markets - and invest in their families.

GROWING numbers of middle class parents in East Anglia are using their savings to help buy homes for their children, it emerged last night.

Property experts said dwindling returns on savings thanks to low interest rates was persuading parents to make long-term investment in the housing markets - and invest in their families.

One East Anglian estate agent also reported "increased activity" in the region's housing market, with more 'viewings and applicants in the last six weeks than at any six-week period in the last 10 months'.

But parents and grandparents looking to use their savings to help with deposits have been warned that they sacrifice having easy access to their money.

The Council of Mortgage Lenders (CML) says that data from 2006 shows 20pc of first-time buyers received 'deposits which they could not realistically have funded out of their own lifetime savings' - in other words, it was highly likely they were being helped by parents or grandparents. By last year, however, nearly half of all first-time buyers under 30 were receiving assistance with their deposits. The Bank of England has cut interest rates aggressively since then, and analysts believe the diminishing returns seen on savings accounts over the past few months will have encouraged families to divert their funds into their offspring's properties rather than investing them elsewhere.

The news about the increased help from parents came as the nationalised Northern Rock revealed it would offer �14bn in new mortgages over the next two years. The new mortgages will include home loans of up to 90pc of properties' values in a bid to help first-time buyers. The Rock's move followed the government's decision to allow the bank to delay the repayment of the final �8.9bn of its �27bn Treasury loan.

Callum Taylor, area director of estate agents William H Brown, said parents were typically paying 10pc deposits - 'perhaps �12,000 on a first-time buyer's house'.

'There's certainly an increase in the number of parental deposits to help buyer's bridge the gap between what lenders will lend and what they need to pay,' Mr Taylor said.

'There's always been an element of that in the market, but there's been an increase lately, particularly when parents have cash and are not getting decent returns on their investments.

"On the one hand, they are helping their offspring and doing the kind parental thing, but it also makes financial sense as well."

Mr Taylor added there was also some evidence that interest in the property market was picking up.

"There are definite signs on increased activity," he said.

"Our viewings and applicant numbers are significantly up in the last six weeks than at any six week period in the last 10 months."

Christopher Hall, a past president for the National Association of Estate Agents and now a property consultant at Homeworks in Norwich, said lower prices, higher deposits and diminished returns in investments elsewhere were encouraging parents to look at property for their children.

'As well as being an alternative investment, it's also a practical helping hand for their families,' he said.

Martin Cunningham, commercial director of property website Homes24.co.uk, said: 'I am not surprised, given the economic situation at the moment whereby savings are paying very little interest, that people are seeing investing in property for their sons and daughters as a better long-term investment.'

Carl Lamb, managing director Norwich-based Almary Green Investments, said: "By putting spare savings into an additional property like this, the bulk of your liquidity will effectively disappear. People would have to be not only significantly wealthy to take such a step but also absolutely certain that they could afford to leave their assets tied up. Given today's difficult financial climate, I think it's hard for anyone to be quite so certain.

"Also, who is to say that we are at the bottom of the market and now is a good time to invest in property generally? If your child is going off to university for three or four years, it could be a useful medium-term investment because you could rent out the property to other tenants/students in the interim."

Mr Lamb added that investors buying a second home should be aware of capital gains tax implications if the property was subsequently sold. They would have to pay CGT at 18pc on the sale proceeds over their personal allowance, which currently stood at �9,600 per individual.

"If they 'gift' the property to their child and then live for seven years, the money then falls outside their estate for inheritance tax purposes. This is clearly a positive thing - but it's not everyone who can afford to give an entire house or flat to their children."

But there was a warning from the CML that the terms of any joint financial arrangements should be agreed by all parties at the outset.

'It's understandable that in the current market environment that more first-time buyers will be looking for help but there needs to be clear communication about whether it's a loan, whether the money needs to be paid back and what the terms are,' said CML spokesman Sarah Robson.