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Mortgage Lending Rising Slightly Still

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Not being old enough to know, could one of the more venerable members give an opinion on whether parental contribution has always been a feature of the ftb market?

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Not being old enough to know, could one of the more venerable members give an opinion on whether parental contribution has always been a feature of the ftb market?

I borrowed the £1600ish quid from my Mum for the 5% deposit on my 1st house in 1995.

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'Has parental contribution always been a feature...?'

'70's -'80's -'90's

Not to anything remotely like the present situation. It seemed a lot easier to save a deposit back then.

Wages were definitely higher in relation to house prices. I bought a Victorian terrace in 1974 for £8K. I would have been earning about £50 a week. An £800 (10%) deposit would have meant saving £15 a week for eighteen months. A bit of overtime worked and saved each week was the answer.

It simply was a lot easier and quicker to amass a deposit because houses were priced within reach of FTB's

Edited by juvenal

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Not being old enough to know, could one of the more venerable members give an opinion on whether parental contribution has always been a feature of the ftb market?

I am too young to know too, but a collegue at work (who as a secetary, aged 20 was able to buy a flat of her own ~20 years ago - how many secetaries can do that now?) when she got married her parents offered her either 10K for the wedding or 10K* to use as a deposit on the house that her and her husband were hoping to buy. Being a sensible type they spent ~£700 on the wedding and used the rest as a bigger deposit on her and her husbands new house. Back then that would have been a sizable percentage of the value of the house - but then again she wasnt a FTB then any more as she sold her flat but I suppose there has always been an element of parental help.

*i am going to check this as it seems an awful lot of money for the time.

Edited by lulu

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'Has parental contribution always been a feature...?'

'70's -'80's -'90's

It seemed a lot easier to save a deposit back then.

Agree.

There just weren't the social pressures to have a new car, eat in over-priced gastro pubs, and take two long-haul holidays a year. It saddens me to listen to the 20-somethings at work, they seem to inhabit a world where you're either living the dream right now, or you're a loser.

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I borrowed the £1600ish quid from my Mum for the 5% deposit on my 1st house in 1995.

But 5% isn't enough now, as the amounts the banksters needed to lend were so high, they went effectively bust and so need much higher deposits. It's all linked, yet to read the media, you'd think if ony we could go back to needing only 5% deposits it'd all be fine again.

And the number of parents able to lend the 20% deposit required must be limited, unless they are all MEWing to fund deposits, which is alsmot by definition like a pyramid scheme. And the MEW available to do this must also be limited.

I just find it staggering that the bottom of the chain is supported in this way, it is totally unsustainable. Isn't it?! :blink::blink:

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But 5% isn't enough now, as the amounts the banksters needed to lend were so high, they went effectively bust and so need much higher deposits. It's all linked, yet to read the media, you'd think if ony we could go back to needing only 5% deposits it'd all be fine again.

And the number of parents able to lend the 20% deposit required must be limited, unless they are all MEWing to fund deposits, which is alsmot by definition like a pyramid scheme. And the MEW available to do this must also be limited.

I just find it staggering that the bottom of the chain is supported in this way, it is totally unsustainable. Isn't it?! :blink::blink:

Indeed.

Plus, I bought right at the bottom of the market and paid the money back in 6 months.

Those were the days.

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But 5% isn't enough now, as the amounts the banksters needed to lend were so high, they went effectively bust and so need much higher deposits. It's all linked, yet to read the media, you'd think if ony we could go back to needing only 5% deposits it'd all be fine again.

And the number of parents able to lend the 20% deposit required must be limited, unless they are all MEWing to fund deposits, which is alsmot by definition like a pyramid scheme. And the MEW available to do this must also be limited.

I just find it staggering that the bottom of the chain is supported in this way, it is totally unsustainable. Isn't it?! :blink::blink:

On the one hand all the rich parents forked out for private school and university for Tarquin or Tamara, so why stop now?

On the other hand their pensions and stock portfolios may not be looking too clever right now...

(there are now one third less "high net worth" people in the world than last year for example)

Net, I think mum & dad will be a big feature of FTB for a long while to come (especially in London), but the number of people benefiting in total from m+d this year will be lower because the rich have been hit hard by the collapse in the stock, commodity and commercial property markets

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And the number of parents able to lend the 20% deposit required must be limited, unless they are all MEWing to fund deposits, which is alsmot by definition like a pyramid scheme. And the MEW available to do this must also be limited.

I just find it staggering that the bottom of the chain is supported in this way, it is totally unsustainable. Isn't it?! :blink::blink:

I previously posted many reasons as to why you are right, but would now add in the mitigating factor of Mum and Dad's on tracker mortgages - referring to the 40% of mortgage holders who have had a big monthly lump of free cash recently.

Previous post.

"The Bank of Mum and Dad..

I argue that the Bank is failing, and may soon almost cease trading, for the following reasons:

As we all know, Mum and Dad have, in so many cases, used their houses as cash machines. MEWing during HPI, which means paying back during HPC.

Mum and Dad have already funded or subsidised Uni tuition fees and living expenses for their offspring. Or are doing so right now.

Mum and Dad’s jobs have never been more insecure. Whatever their employment level. Long term employees are expensive to any firm, and thus are targets to be made redundant, or offered severance.

Under Boardroom level, the higher your salary is, the less likely you are to be offered the chance to stay on at 65. You are expensive, and replaceable with a cheaper model. And you have no legal right whatever to stay.

Mum and Dad know future wage settlements in most sectors will be smaller and harder to negotiate.

They know both income tax and interest rates are going to rise, whichever government is in power.

Mum and Dad’s savings have been hammered. Annual interest earnings have typically almost halved, as many STR’s know only too well.

Mum and Dad’s pension pots (nearly all pensions are equity related) have been battered. Anything between 10% - 40% down on any given pension plan

Some employees will see their actual pension contract alter adversely over the next couple of years. Pension schemes are changing conditions for existing members, as well as new ones.

If Dad’s approaching retirement, he knows annuity rates are falling.

Mum and Dad’s house is worth considerably less. If they have a second home, the perceived ‘hit ‘ is doubly evident to them.

Living costs are rising. Everyone accepts the real cost of living is up 10% on last year.

Both old age care home fees (and insurances against this eventuality) rise annually.

The size of mortgage deposits that parents originally envisaged being able to make for their kids, now need revising upwards drastically. We are no longer in five grand deposit territory, and won’t be for long while.

All the above mean that parental plans conceived years back to gift house or flat deposits to the children will increasingly be shelved.

I conclude by saying that the very wealthy (as ever) will be unaffected. I think this Spring has seen them in action, buying starter properties for their offspring, and providing a significant tranche of the very few mortgages actually taken out. But their numbers are decreasing.

By winter I contend that the Bank of middle class Mum and Dad will no longer be a significant factor in house purchases.

The Bank no longer has confidence in the future, or the underlying assets to gift money.

That's the way I see it."

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I previously posted many reasons as to why you are right, but would now add in the mitigating factor of Mum and Dad's on tracker mortgages - referring to the 40% of mortgage holders who have had a big monthly lump of free cash recently.

Previous post.

"The Bank of Mum and Dad..

I argue that the Bank is failing, and may soon almost cease trading, for the following reasons:

As we all know, Mum and Dad have, in so many cases, used their houses as cash machines. MEWing during HPI, which means paying back during HPC.

Mum and Dad have already funded or subsidised Uni tuition fees and living expenses for their offspring. Or are doing so right now.

Mum and Dad’s jobs have never been more insecure. Whatever their employment level. Long term employees are expensive to any firm, and thus are targets to be made redundant, or offered severance.

Under Boardroom level, the higher your salary is, the less likely you are to be offered the chance to stay on at 65. You are expensive, and replaceable with a cheaper model. And you have no legal right whatever to stay.

Mum and Dad know future wage settlements in most sectors will be smaller and harder to negotiate.

They know both income tax and interest rates are going to rise, whichever government is in power.

Mum and Dad’s savings have been hammered. Annual interest earnings have typically almost halved, as many STR’s know only too well.

Mum and Dad’s pension pots (nearly all pensions are equity related) have been battered. Anything between 10% - 40% down on any given pension plan

Some employees will see their actual pension contract alter adversely over the next couple of years. Pension schemes are changing conditions for existing members, as well as new ones.

If Dad’s approaching retirement, he knows annuity rates are falling.

Mum and Dad’s house is worth considerably less. If they have a second home, the perceived ‘hit ‘ is doubly evident to them.

Living costs are rising. Everyone accepts the real cost of living is up 10% on last year.

Both old age care home fees (and insurances against this eventuality) rise annually.

The size of mortgage deposits that parents originally envisaged being able to make for their kids, now need revising upwards drastically. We are no longer in five grand deposit territory, and won’t be for long while.

All the above mean that parental plans conceived years back to gift house or flat deposits to the children will increasingly be shelved.

I conclude by saying that the very wealthy (as ever) will be unaffected. I think this Spring has seen them in action, buying starter properties for their offspring, and providing a significant tranche of the very few mortgages actually taken out. But their numbers are decreasing.

By winter I contend that the Bank of middle class Mum and Dad will no longer be a significant factor in house purchases.

The Bank no longer has confidence in the future, or the underlying assets to gift money.

That's the way I see it."

+1

Except:

Parents dote on their children, who else have they got their money to give to?

I refer you to your excellent review of Sarah Beeny's new show with the doting/stupid mother giving her brattish 21 daughter £300k to play with

Many middle aged/middle class people can give Tarquin/Tamara £50k still

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I've got some friends, one earns good (but not spectacular) money for a management consultancy, say £50k a year. His fiancee is a research scientist on about £30k.

Budget - £500k for their first home

Thanks to the bank of mum and dad....

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What are the tax implications for this? Isn't there a "gift" limit per tax year, above which income tax needs to be paid?

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I would have thought that another factor is that mum and dad and, more relevantly, grandmother and/or grandfather are far more likely to still be alive for people now at ftb age than they were in the 70s and 80s, so they sometimes give gifts to the ftb generation where in the past there would have been an inheritance (possibly from selling a house).

Y

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What are the tax implications for this? Isn't there a "gift" limit per tax year, above which income tax needs to be paid?

No its an inheritance tax issue

If you give the gift long enough before you kick the bucket there is no tax to pay (I think its 8-10 years?)

This is another driver for the desire to hand over the dosh to junior now rather than in dotage

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What are the tax implications for this? Isn't there a "gift" limit per tax year, above which income tax needs to be paid?

Yes - annual max main gift £3000 per parent, plus a range of smaller one off-gifts for weddings, birthdays etc.

But you can give away larger amounts providing the giver lives seven years from the date of the gift.

If you die within seven years , in theory at least, inherititance tax may be due pro rata on that past gift. Depending on the size of the Estate.

Google 'Inheritance Tax' for details

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+1

Parents dote on their children, who else have they got their money to give to?

Many middle aged/middle class people can give Tarquin/Tamara £50k still

We basically agree. The only remaining question is how many of these doting parents are there?. The evidence suggests that they must be decreasing, and can't ultimately sustain the bottom rung of even a very small market.

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Yes - annual max main gift £3000 per parent, plus a range of smaller one off-gifts for weddings, birthdays etc.

But you can give away larger amounts providing the giver lives seven years from the date of the gift.

If you die within seven years , in theory at least, inherititance tax may be due pro rata on that past gift. Depending on the size of the Estate.

Google 'Inheritance Tax' for details

Interesting. So that's probably another factor in the rise of Bank of Mum & Dad over the last decade or so. The incentive to get rid of excess cash/equity earlier to dip below the inheritance tax threshold.

It's the sort of thing the Conservatives would probably like to raise the level of, which may encourage some parents to keep hold of their "hard earned" until the bitter end.

It really is just one big pyramid scheme isn't it. The baby boomers creaming off the profits to enslave their offspring at the bottom end. All driven by the fear of them missing out. Sad. Truly sad.

Edit: baby boomers

Edited by the stig

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We basically agree. The only remaining question is how many of these doting parents are there?. The evidence suggests that they must be decreasing, and can't ultimately sustain the bottom rung of even a very small market.

Yes I agree they are decreasing, HNW worth individuals went down 33% last year according to statistics

I would only suggest they will always be a sizeable part of the FTB market, because the rich are always with us

They can't grow the FTB market by themselves, again I agree, but they can keep it ticking over at a very low level

Can they sustain prices, no (so I agree with you again)

You'd kind of hope they would be smart enough to drive them down, being smart enough to get rich in the first place

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Interesting. So that's probably another factor in the rise of Bank of Mum & Dad over the last decade or so. The incentive to get rid of excess cash/equity earlier to dip below the inheritance tax threshold.

It's the sort of thing the Conservatives would probably like to raise the level of, which may encourage some parents to keep hold of their "hard earned" until the bitter end.

It really is just one big pyramid scheme isn't it. The baby boomers creaming off the profits to enslave their offspring at the bottom end. All driven by the fear of them missing out. Sad. Truly sad.

Edit: baby boomers

In London, where I live its quite stark

Mostly:

People I know from average/poor family backgrounds mostly rent

People I know from rich families already own and have made a bucket from HPI

Its quite regressive and rather unfair, especially since house price gains are untaxed on PPR

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No its an inheritance tax issue

If you give the gift long enough before you kick the bucket there is no tax to pay (I think its 8-10 years?)

This is another driver for the desire to hand over the dosh to junior now rather than in dotage

Could it also be that some of these parents are not giving this money to their children, but lending it to them. If their savings are not earning much interest they may see this as a good way to kill 2 birds with one stone

??

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Could it also be that some of these parents are not giving this money to their children, but lending it to them. If their savings are not earning much interest they may see this as a good way to kill 2 birds with one stone

??

Yes and a good point, tax free too

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Could it also be that some of these parents are not giving this money to their children, but lending it to them. If their savings are not earning much interest they may see this as a good way to kill 2 birds with one stone

??

That is a good point, if they aren't getting much of a return on their savings and the perception (reality?) is that it is riskier to hold more than 50K in one institution than 2 years ago, then why not loan the money to the kids? After all, banks are no longer safe but we are now 'at the bottom' and 'grabbing a bargain', 'prices can only go up', 'property is the best form of investment' bla di bla.

Edited by MinceBalls

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Its insidious how the high prices are causing this gradual infection of more and more people.

However it can't go much farther unless life expectancy means that peoples great-grandparents can be tapped.

Most obviously it stops with this current generation because by the time they get old they won't have anything left to help their children get on the ladder, they will have spunked it all up the wall by paying a massive amount of mortgage interest to the banks.

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