'bank Of Mum And Dad' Helps 80% Of First-Time Buyers

[Georgia O'Keeffe]

http://www.dailymail.co.uk/news/article-1287785/Bank-mum-dad-helps-80-time-buyers.html

'The proportion of young first-time buyers who need help from the 'bank of mum and dad' soared to 80 per cent under Labour.

The figure is up from just 10 per cent of home buyers aged under 30 in 1995, two years before Tony Blair took New Labour into power.

Critics say the figure is a damning legacy of Labour's 13 years in power, which saw a runaway price boom and a failure to build the new homes needed.

It is also evidence of a policy by the big banks and building societies to ration home loans only to those who have a large deposit.

Many banks demand stakes of 25 per cent and more, which means first-time buyers cannot hope to get the necessary cash without help from relatives.

Labour's house price boom brought a tax bonanza, with a huge increase in stamp duty from families paying inflated prices to move up the property ladder.

It also fuelled the bricks and mortar wealth of homeowners, leading to the consumer spending and borrowing that contributed to boom and bust.

Now many thousands of middle-aged and older people are having to dip into their savings or borrow against their homes to help their children with a deposit.

Many parents do not have the cash, with the result that the average age of a first-time buyer who has not had a hand-out now stands at 38.

LibDem Treasury spokesman, Lord Oakeshott said: 'Labour left a terrible housing legacy.

'Before Blair and Brown came to power, nine out of ten buyers under 30 could buy their first home with their own deposit.

'Now, after Labour's runaway house price boom and failure to build affordable housing, four in five have to rely on the bank of mum and dad.'

The difficulties for young buyers have wider consequences for society.

Many young couples are putting off having children until they have saved enough to get the keys to their own front door.

And, increasingly, adult children are returning to the family home, putting a financial burden on their parents.

The dearth of young buyers, who are the lifeblood of a healthy property market, is a problem for all those buying and selling a home.

Housing chains cannot form and people cannot move unless young people can afford to buy.

Among the reasons that house prices more than doubled under Labour was the fact there was a shortage of new properties.

Just 118,000 were built last year, the lowest number since 1947'

heard it soo many times,mum and dad,

'son/daughter,you can't go wrong with property,only ever goes up...yada yada yada.....'

sentencing them to a lifetime of debt slavery.head hits table.

oh dear , watch in slow motion the magical ability of accrued middle class wealth disappear back into the void that created it, marvel at the consistent ability of people to fck themselves over.

Don't cry for me Argentina

The truth is our middle class want to join you

All through our mewing days

Our mad existence

We kept our promise

Don't keep your distance, For we are one and the same

Edited June 19, 2010 by Tamara De Lempicka

[the flying pig]

am i imagining this or was that a daily wail article featuring at least an implied suggestion that rampant pwoperdee price inflation is anything other than colossally virtuous?

[DeepLurker]

am i imagining this or was that a daily wail article featuring at least an implied suggestion that rampant pwoperdee price inflation is anything other than colossally virtuous?

I too had to check that the article was not dated 1st April!

[shell]

But do we have to wait for a whole generation of boomers to pop their clogs before house prices correct? Jeez it's beginning to feel like it.

[juvenal]

an interesting perpective and very true.most middle calss wealth on paper is in the family home.ironic in the extreme.

.this is gonna be brutal on the dreams of foreign retirement in the costas.

BBut the £50K they give the kids as a deposit will be returned to them - by the collapse in price of the apartment they will still buy on the Costas!

Edited June 19, 2010 by juvenal

[SleepyHead]

http://www.dailymail.co.uk/news/article-1287785/Bank-mum-dad-helps-80-time-buyers.html

The figure is up from just 10 per cent of home buyers aged under 30 in 1995, two years before Tony Blair took New Labour into power.

Now many thousands of middle-aged and older people are having to dip into their savings or borrow against their homes to help their children with a deposit.

Many parents do not have the cash, with the result that the average age of a first-time buyer who has not had a hand-out now stands at 38.

Anyone spotted how that average first time buyer age seems to go up by 1 year......... each year that passes............ hmmn,, interesting.

[jammo]

Anyone spotted how that average first time buyer age seems to go up by 1 year......... each year that passes............ hmmn,, interesting.

Probably the editor's son. I wonder whether these media property ramping types are finally realising the damage they are doing? It's not the young generation (young professionals?) who're paying for the ponzi after all We're too clued. No-one I know of the "average FTB age" is buying, just thinking about it - when prices fall Can't get one over on us. Well, if you could, more fool us. Not many fool left though IMHO.

[hirop]

To paraphrase the article, "unaffordable house prices kept unaffordable by parents giving handouts to sprogs." I'm a little pleased, as a 38 year old ftb without assistance, that I am not behind the curve. Still aint buying though, i had put down a mental marker it would be wise to do this 25 year debt thing before I was 40, but the more I think about it, and match it to my own aversion to debt, if prices are continuing to drop in the nw next year, I'll continuing waiting it out, continue adding to my deposit , and look then to take a mortage over a shorter term.

[scepticus]

you are all missing the obvious - that the boomers are passing their fake wealth onto their offspring early, and that this transferral makes that fake wealth less fake, and that these boomer banks are impoverishing their own retirement in favour of their kids.

it all makes perfect sense to me, and yes this does act to de-ponzify matters to some extent.

however the new ponzi in the making is the new wealth concentration this is likely to result in as the wealth of a large number of retiring boomers gets passed early to a smaller number of genX.

However that is tomorrows ponzi, not todays.

Assuming this trend continues then it supports both demand and house prices to some extent, though likely by not enough to prevent decline (not crash) in both.

[Britney's Piers]

The modern version of land owning aristocracy, nice if you're lucky to be born to the right parents.

[Executive Sadman]

the average age of a first-time buyer who has not had a hand-out now stands at 38.

Well done gordon.

[christhpc]

I don't know anyone in my age group that's bought or is currently preparing to buy without a considerable loan or gift from their parents.

And in one case, a couple I know that are planning to buy are stretching themselves to the limit based on current mortgage rates (4.5% 2 years fixed apparently) and a 40 grand loan from dad. Showing him what the payments would be at twice that rate or asking him if he thinks that rate will be available 2 years down the line doesn't seem to dissuade him. I hasten to add that it was my non-HPC friends that initiated the mauling on this guy regarding affordability. It was all I could do not to weigh in with a full on Financial Planner style tirade.

[okaycuckoo]

you are all missing the obvious - that the boomers are passing their fake wealth onto their offspring early, and that this transferral makes that fake wealth less fake, and that these boomer banks are impoverishing their own retirement in favour of their kids.

it all makes perfect sense to me, and yes this does act to de-ponzify matters to some extent.

however the new ponzi in the making is the new wealth concentration this is likely to result in as the wealth of a large number of retiring boomers gets passed early to a smaller number of genX.

However that is tomorrows ponzi, not todays.

Assuming this trend continues then it supports both demand and house prices to some extent, though likely by not enough to prevent decline (not crash) in both.

Exactly what wealth is that? Linky please.

I've come across two retired people who invested in property and ended up with £250k+ of credit card debt in the effort to keep the "only ever goes up" empire afloat. Many legatees will find there's nothing left in the pot.

Your theory may ultimately get face-palmed by reality. Accounts, they're a bitch!

[expatowner]

Getting help from the bank of mum and dad seems pretty sound to me.

I know families where mum and dad have feck all and this might be seen to disadvantage offspring but I recon it makes those offspring even more determined to look after their finances better than m+d did.

Getting help from mum and dad fosters family commitments and thats a good thing in my book.

Much better to keep it in the family than to rely on the nanny state.

Obviously the bank of M+D very rarely charge interest so this helps things for the offspring too

I can see this family lending practice becoming more widespread.

Edited June 20, 2010 by expatowner

[catsick]

Where does this average age of 38 come from ? I cant believe its true for real first time buyers unless it includes 70 year old newly widowed and 50 year old divorcees etc

[Pent Up]

Where does this average age of 38 come from ? I cant believe its true for real first time buyers unless it includes 70 year old newly widowed and 50 year old divorcees etc

a lot of them I assume moved out of mummy and daddys to rent when they were younger as they couldn't afford to buy. My peer group range from 27 - 35 and every one of them is living with parents with little prospect or even aspiration to buy a house in the foreseeable future.

[PropertyGuru]

it all makes perfect sense to me, and yes this does act to de-ponzify matters to some extent.

as usual, scepticus misses the point entirely.

you can't deleverage a ponzi by extracting money from it... and then putting it back into the ponzi

jeez. numbnuts pretending to be intellectuals.

[Pent Up]

as usual, scepticus misses the point entirely.

you can't deleverage a ponzi by extracting money from it... and then putting it back into the ponzi

+1

the scam doesn't work without exponential amounts of new money joining.

Edited June 20, 2010 by Pent Up

[LJAR]

I posted a similar set of stats on first time buyer age from the bbc a few months ago.

It is truly amazing that the UK presists in believing that building a sufficient number of houses will "concrete over the countryside"

It is plain bullsh1t, there is loads of room even in the home counties for lots of nice big houses in all those fields that are lying fallow or being subsidised by the EU.

Funnily enough (at 26) I will be in exactly the position described. My Fiancee's grandparents have just died, their house passed to her dad, who has sold it (for an outrageous sum of money - I told him to take it and run). Now he is talking about helping us with our deposit, my Dad has been saying the same thing. It is bloody madness!

All I want to do is run for another country where I can get a decent 4 bed detached for the price of a two bed Victorian terrace here.

[Tired of Waiting]

But do we have to wait for a whole generation of boomers to pop their clogs before house prices correct? Jeez it's beginning to feel like it.

Exactly.

Never in the field of national economies so many people had so much money and so little sense.

These people can do a lot of damage.

Ironically, on the other hand, they may be saving the UK financial system. Those 25% deposits are a reasonable cushion for the banks. In a few years we may have a crash without breaking the banks, thanks to these naive buyers. Cruel social Darwinism in action.

We, the prudent, will be rewarded - eventually. But we will have to wait a little longer... Oh my... I was already "Tired of Waiting" in 2007!

Edited June 20, 2010 by Tired of Waiting

[Tired of Waiting]

Anyone spotted how that average first time buyer age seems to go up by 1 year......... each year that passes............ hmmn,, interesting.

Very good point.

[Tired of Waiting]

Probably the editor's son. I wonder whether these media property ramping types are finally realising the damage they are doing? It's not the young generation (young professionals?) who're paying for the ponzi after all We're too clued. No-one I know of the "average FTB age" is buying, just thinking about it - when prices fall Can't get one over on us. Well, if you could, more fool us. Not many fool left though IMHO.

How, why bubbles grow, and then burst?

"Well there's always a greater fool. Until one day, quite suddenly, there isn't."

[Tired of Waiting]

To paraphrase the article, "unaffordable house prices kept unaffordable by parents giving handouts to sprogs." I'm a little pleased, as a 38 year old ftb without assistance, that I am not behind the curve. Still aint buying though, i had put down a mental marker it would be wise to do this 25 year debt thing before I was 40, but the more I think about it, and match it to my own aversion to debt, if prices are continuing to drop in the nw next year, I'll continuing waiting it out, continue adding to my deposit , and look then to take a mortage over a shorter term.

Good plan. We are planning to do the same.

And one more point: To avoid turning into interest paying slaves, we are thinking about buying 1st a small, cheap place, and over-pay the mortgage as much as possible, or build up alternative investment - depending on the rates.

We have to build up our own capital/equity, as fast as possible. We have to get reed of the leeches. Our freedom depends on it.

[Tired of Waiting]

At least Mom&Dad will suffer using their own money...

If you reigned in the loans of over 70% (to all borrowers!) removing MEW-ing from the BTL brigade.

And the Bank of Mom& Dad reigned in their stupid lending, then UK house prices may well show a healthy collapse

These M&Ds' deposits, 25% or more, may protect the banks, allowing a 25% price fall. Cruel social Darwinism, I know, but on the other hand, they are just giving back a windfall equity gain.

[JustYield]

In other news, snake eats its own tail and gets stuck.