Bbc Business This Morning - Bank Of Mum And Dad Loans

[bingobob]

This isn't necessarily the case. Although RBS & HBOS are effectively zombie banks, others are in better shape. Buried away in the Nationwide's most recent report was the statement that average LTV across their whole loan book is approx 65%. They can easily absorb price falls. Ironically, their problem is margin - which would be improved by a rise in rates.

UK banks have now had a good three years to 'work' their balance sheets into better shape. The underlying asset 'value' isn't as important, to them, as the surety that the debt will continue to be serviced. Low LTV on a paucity of new lending has helped to build a buffer (ongoing), such that any defaults, in the future, can be possessed on minimum forbearance and with tolerable haircuts in relation to the bigger picture.

House prices will fall in the UK, because it's part of the medium to long term programme for banks to return to healthier lending practices, with less reliance on dwindling wholesale funding - ie same volume; more individual loans; spread the risk.

Anyone who vainly believes that the 'value' of UK housing stock has substance, had better start preparing themselves for a shock.

In the scenario being discussed, the banks will lose if prices fall because mummy and daddy won't need to take a loan (and pay interest) to cover their adult childrens deposit. Also the mortgage required by the children will be lower and the interest harvested by the banks also lower. It seems to me however, that in the crazy situation we find ourselves in, most parents are so short sighted that they would rather take a 50,000 GBP loan from a bank than have their precious house lose any perceived value, even if they up losing money in the long run.

Having said that, most boomers are too selfish to help their kids out so it's all pretty irrelevent!

[@contradevian]

I don't know, I quite like HuTH. It captures so many things that are wrong with the UK in 2011 and presents them in a pure, crystalline form: bored retirees doing up a rental which ought to be some young FTB couple's nest simply because they have more money than they know what to do with, Asian "businessmen" squeezing five bedrooms into a 3 bed semi for their latest HB scam, boring shaven-headed men in their 40s converting entire streets into magnolia prison cells for students who are borrowing money from a bankrupt government to study Astrology at the local ex-poly, parents MEWing to buy a small flat for their pathetically grateful late 20something offspring to live in... On and on it goes.

Future economic historians will marvel at the madness of it.

I'm warming to HuTH. It might just be a very subtle attempt at satire.

[Dorkins]

Buried away in the Nationwide's most recent report was the statement that average LTV across their whole loan book is approx 65%. They can easily absorb price falls.

That would be fine, except that residential property in the UK is double the long term average relative to wages, and wages may well start to fall soon. Three years of double digit HPC and the Nationwide loan book is worthless.

[bobthe~]

I was interested to hear that 80% of FTBs are buying only because of Bank of Mum and Dad and how that is much higher proportion than (did she say 4?) years ago.

I wonder how the absolute numbers of BoMaD have changed over this period.

[Tonkers]

I don't know, I quite like HuTH. It captures so many things that are wrong with the UK in 2011 and presents them in a pure, crystalline form: bored retirees doing up a rental which ought to be some young FTB couple's nest simply because they have more money than they know what to do with, Asian "businessmen" squeezing five bedrooms into a 3 bed semi for their latest HB scam, boring shaven-headed men in their 40s converting entire streets into magnolia prison cells for students who are borrowing money from a bankrupt government to study Astrology at the local ex-poly, parents MEWing to buy a small flat for their pathetically grateful late 20something offspring to live in... On and on it goes.

Future economic historians will marvel at the madness of it.

Ha ha ha, can I add my particular favourite, the middle aged single female getting a BTL on IO to add a bit of her design flair to, receiving rent that does not cover the IO mortgage and not working out that she is not only working for free for the banks, she is subsidising them.

[bingobob]

Ha ha ha, can I add my particular favourite, the middle aged single female getting a BTL on IO to add a bit of her design flair to, receiving rent that does not cover the IO mortgage and not working out that she is not only working for free for the banks, she is subsidising them.

You know my landlady then!

[Papa Serf]

Ha ha ha, can I add my particular favourite, the middle aged single female getting a BTL on IO to add a bit of her design flair to, receiving rent that does not cover the IO mortgage and not working out that she is not only working for free for the banks, she is subsidising them.

Or the married Mum stuck at home watching all this property porn.

[ccc]

If it's written down it can be FOI'd.. Worth a try

Good idea. Although from other posters compaints to the BBC, and a general lack of reply - I would not hold my breath. I may just write and ask though.

Procedures standard practice for property article reporting on the BBC.

You never know it may just be there.

I don't know, I quite like HuTH. It captures so many things that are wrong with the UK in 2011 and presents them in a pure, crystalline form: bored retirees doing up a rental which ought to be some young FTB couple's nest simply because they have more money than they know what to do with, Asian "businessmen" squeezing five bedrooms into a 3 bed semi for their latest HB scam, boring shaven-headed men in their 40s converting entire streets into magnolia prison cells for students who are borrowing money from a bankrupt government to study Astrology at the local ex-poly, parents MEWing to buy a small flat for their pathetically grateful late 20something offspring to live in... On and on it goes.

Future economic historians will marvel at the madness of it.

Nooooooooooo

And they all seem to wear the same clothes. Jeans and a white pressed shirt.

[Dorkins]

Nooooooooooo

And they all seem to wear the same clothes. Jeans and a white pressed shirt.

I think it shows a certain lack of independent thought, a "sheepleness of mind" if you will.

Same haircut, same clothes, same investment strategy. They just do what everybody says is a good idea and leave the hard thinking to somebody else.

Edited January 14, 2011 by Dorkins

[ccc]

I think it shows a certain lack of independent thought, a "sheepleness of mind" if you will.

Same haircut, same clothes, same investment strategy. They just do what everybody says is a good idea and leave the hard thinking to somebody else.

Yep. And the annoying thing is so many of them got very lucky. Good to see it all unravelling for many though.

[Misanthrope]

I think it shows a certain lack of independent thought, a "sheepleness of mind" if you will.

Same haircut, same clothes, same investment strategy. They just do what everybody says is a good idea and leave the hard thinking to somebody else.

That which the Lord giveth, the Lord can taketh away.

[jmzr]

I've done my bit.

I have emailed them with the text below

dear sirs

during bbc breakfast this morning, there was a short section which looked at the % of parents who were providing their children with large deposits in order to get on the 'housing ladder'.

during the article, reference was made as to how it is 'becoming essential' for parents to provide these large sums of money ir order that their children may buy a property.

at NO TIME in this article was any reference made to the fact that this is so because house prices are so incredibly inflated.

instead, the cause was linked to strict mortgage lending criteria.

i find this astonishing and in many ways misrepresentative of the truth.

mortgage lending has curtailed and been made more selective precisely because house price has ballooned out of all proportions with earnings.

not once, not ever, has the BBC reported on this.

i am beginning to think that the BBC has some hidden agenda and that it is failing in it's responsibility and pledge to provide unbiased journalism.

the subject of houseprices, and the obvious need for them to deflate must surely be one of the biggest and most important issues in the UK today.

vast swathes of people simply cannot afford to buy because houses are so incredibly expensive. peoples lives are being affected so enormously by this one single fact, and yet the BBC simply fails to ever mention it.

i sincerly hope that the BBC acts more responsibly in future and that it starts to bring this issue to the fore.

yours faithfully

xxxx

Edited January 14, 2011 by jmzr

[Bloo Loo]

emailed.

It was basically an ad for the loan company.

Should have to mention that house prices can go up and down.

Ill mention this one again for this thread too

http://www.hitachi--magic--wand.com/

Hitachi, always there to stimulate things.

[Lambie]

VERY good idea.

Apparently not, a cursory glance through http://www.whatdotheyknow.com/search/bbc%20editorial indicates this will be the response :

The information you have requested is excluded from the Act because it is held for the purposes of ‘journalism, art or literature.’ The BBC is therefore not obliged to provide this information to you and will not be doing so on this occasion. Part VI of Schedule 1 to FOIA provides that information held by the BBC and the other public service broadcasters is only covered by the Act if it is held for ‘purposes other than those of journalism, art or literature”. The BBC is not required to supply information held for the purposes of creating the BBC’s output or information that supports and is closely associated with these creative activities

Spend your money and refuse to justify why, it's what they do

[Bloo Loo]

snip.

Having said that, most boomers are too selfish to help their kids out so it's all pretty irrelevent!

One minute its the boomers fault, next they are too selfish to help out.

Just ask yourself...WHO is paying the boomers asking prices? And WHO is forcing them to do so?

[bingobob]

One minute its the boomers fault, next they are too selfish to help out.

Just ask yourself...WHO is paying the boomers asking prices? And WHO is forcing them to do so?

We are now in a situation where young people cannot afford to buy houses without help from boomers who already hold the houses.So the boomers will 'help out' but only if it benefits them, either by maintaining the value of their own house or, in many cases, by actually profiteering from their own children. I know of a number of situations where boomers have helped out their children, but they have always made sure they profit from it. The latest example ended very badly only a few weeks ago when a young couple were forced to pay the husbands mother around 20k over market value for the mothers 50% share, just to buy her out of the property so they could sell it and move on. The mothers unrealistic expectations of HPI meant that she would not, under any circumstances accept less than a certain amount and as a result there was no way that the house would sell on the open market. The couple in question attribute the stress of the situation as the significant factor in the wife losing her unborn child when 8 months pregnant, you can imagine what this has done to the family, but still the mother insists that she gets her money.

Of course you're right to say that no one is forcing anyone to buy a house, but there's a great deal of pressure, from a large number of trusted sources (including parents) being put on young people to buy into the ponzi scheme and to keep the whole thing rolling on. Housing should be seen as a basic need, not as a vehicle for one generation to profit from another.

[Bloo Loo]

We are now in a situation where young people cannot afford to buy houses without help from boomers who already hold the houses.So the boomers will 'help out' but only if it benefits them, either by maintaining the value of their own house or, in many cases, by actually profiteering from their own children. I know of a number of situations where boomers have helped out their children, but they have always made sure they profit from it. The latest example ended very badly only a few weeks ago when a young couple were forced to pay the husbands mother around 20k over market value for the mothers 50% share, just to buy her out of the property so they could sell it and move on. The mothers unrealistic expectations of HPI meant that she would not, under any circumstances accept less than a certain amount and as a result there was no way that the house would sell on the open market. The couple in question attribute the stress of the situation as the significant factor in the wife losing her unborn child when 8 months pregnant, you can imagine what this has done to the family, but still the mother insists that she gets her money.

Of course you're right to say that no one is forcing anyone to buy a house, but there's a great deal of pressure, from a large number of trusted sources (including parents) being put on young people to buy into the ponzi scheme and to keep the whole thing rolling on. Housing should be seen as a basic need, not as a vehicle for one generation to profit from another.

you are not wrong about the pressure...its relentless, its about fear and it is aimed at keeping lenders in clover.

FEAR is the driver in this market....not desire for a good decent home in this the 7th richest society in the World....

[RichB]

Apparently not, a cursory glance through http://www.whatdothe...bbc%20editorial indicates this will be the response :

Spend your money and refuse to justify why, it's what they do

Surely in this case though it is advertising, not journalism. On a broader level, Propaganda is the term more usually applicable.

[Tiger Woods?]

Bit on about new loans available for Barratts homes - parents can take up to 50k on an unsecured loan to 'help' their kids buy a house.

...

No loan is unsecured these days. When push comes to shove, you'll always end up with an order on your property. Unsecured loans are just secured loans for which you have the pleasure of paying a premium so you can sleep with the false belief that they can't take your house when you default.

It is criminal, pure and simple.

[Jie Bie]

I wonder what the panellists would have said if I had asked them what those of us without access to the BoMaD are meant to do.

For example, my mum cannot afford to "gift" me money, and although she does have plenty of equity in the family home her monthly income is such that she would not be able to afford the repayments on any significant loan. Even if she wanted to risk it, I would not want her jeopardising her own home, which she has lived in since 1983. As has already been discussed if anyone who tried to default on this "unsecured" loan would most likely find out their home was at risk after all.

I'd love to ask the panellists, given that they believe BoMaD is "essential", what they think I am supposed to do?

[yellerkat]

Ill mention this one again for this thread too

http://www.hitachi--magic--wand.com/

Hitachi, always there to stimulate things.

http://www.hitachi--magic--wand.com/product_info.php?products_id=41

NSFW!

( )

[ccc]

No loan is unsecured these days. When push comes to shove, you'll always end up with an order on your property. Unsecured loans are just secured loans for which you have the pleasure of paying a premium so you can sleep with the false belief that they can't take your house when you default.

It is criminal, pure and simple.

Never really thought of it like that. However makes sense.

I wonder what the panellists would have said if I had asked them what those of us without access to the BoMaD are meant to do.

For example, my mum cannot afford to "gift" me money, and although she does have plenty of equity in the family home her monthly income is such that she would not be able to afford the repayments on any significant loan. Even if she wanted to risk it, I would not want her jeopardising her own home, which she has lived in since 1983. As has already been discussed if anyone who tried to default on this "unsecured" loan would most likely find out their home was at risk after all.

I'd love to ask the panellists, given that they believe BoMaD is "essential", what they think I am supposed to do?

Debt is good. Stop trying to think for yourself. Debt is good. Did you hear that ? Debt is good.

Now shut up and get back to work prole.

Or words to that effect.

[Tired of Waiting]

Apparently not, a cursory glance through http://www.whatdotheyknow.com/search/bbc%20editorial indicates this will be the response :

Spend your money and refuse to justify why, it's what they do

B@stards

North Korean standards of transparency, but much more sophisticated, of course. (I'm sure that young N. Korean heir would love to learn that.)

[Tired of Waiting]

you are not wrong about the pressure...its relentless, its about fear and it is aimed at keeping lenders in clover.

FEAR is the driver in this market....not desire for a good decent home in this the 7th richest society in the World....

+ 1

It is mind boggling isn't it? 21st century and all that. Forget flying cars, we can't even afford (or are allowed to build) our own fecking shelter!

[Tired of Waiting]

Surely in this case though it is advertising, not journalism. On a broader level, Propaganda is the term more usually applicable.

Exactly. The question was precisely that: "impartial journalists", really??

Like:

Dear BBC, have you really been impartial journalists, or have you been acting as government propaganda tool? Specifically regarding the housing market since the bubble burst, have you been impartial journalists, or have you been following some "positive" editorial line, such as tying to "talk the economy up", or trying to avoid a "house prices crash"?

"Impartial journalists", really??