Bbc Business This Morning - Bank Of Mum And Dad Loans

[bingobob]

Okay, Mrs Bear is probably right, it's useless trying to argue.

We helped our kids, and with money which - as we made plain - was not a loan, but a gift. They found the house they wanted, and we helped to keep their mortgage payments down. We have tried hard not to do anything which could be construed as emotional blackmail.

As for "propping up a ponzi scheme" - you could argue, some do, that anyone who bought or sold a property in the last 10 years, or thereabouts, was propping up the status quo. Perhaps you think that we should have the sold the house we had for the price it would have fetched in 2000, or 1990 or 1980. Perhaps we should have refused to pay more than the 2000 price for another house. But it doesn't work that way.

You can't opt out of the housing market. If you don't buy, you have to rent and the rents are (mostly) set by the state of the housing market. If we had refused to help, the children would have had to borrow more money to get their house. I can't see why taking assistance is "feckless" - any more than accepting an inheritance is irresponsible. I don't see how passing on some of the capital which we had managed to put aside is "exploitation".

I agree that house prices have become de-coupled from common sense. I think that some form of credit control is probably justified, at least for consumer borrowing, and should have been applied years ago.

What I do not see is what it is that I am supposed to feel guilty for, nor what actions I am supposed to take.

I suspect that your basic position is that it is not fair that the older generation should have more money than the younger one, and that the situation should be put right by the older ones having it stripped from them forcibly by the younger ones, so that it is not "a gift" (which demeans the recipient) but a forcible redistribution of wealth, which ennobles those who have taken it..

So go agitate for a change of politics which will tax higher incomes at 65%, and capital gains at a similar rate and, perhaps inheritance tax even higher. Then the government can go back to building social housing which can be let out on sensible long-term tenancies which make it practical for people to plan for long-term renting, unafraid of being turfed out on 3 months' notice. Such an option would probably exert a downward pressure on house prices, but should also make it more practical for people to adopt renting as a way of life.

If you have some other scheme in mind, then produce it. But really, simply saying that everyone between 45 and 65 is a greedy, ignorant selfish so-and-so who doesn't have any clue what it's like to be young or hard up is, in itself, not true, not helpful and not even likely to make others impressed by your vision or judgement.

db

Without getting too personal, you can argue that you have been neither greedy nor selfish, but I would argue that you have been ignorant in so far as you have helped your children make what is potentially the worst financial decision of their lives. You accept that house prices defy common sense yet you still encourage your children to pay those prices, thereby helpimg to sustain prices that defy common sense. The children are feckless for accepting the help because they lack the imagination to try and think of another way through life other than over paying for a house and taking on potentially crippling mortgage debt. If young people in this country simply said 'no, it's too expensive, I don't think I'll bother buying', house prices would fall to a sustainable level.

I don't know the ins and outs of your situation obviously and I wouldn't want to comment on your sitiuation directly. However what I would say is that there are young people that will be stuck with a millstone around there neck for years and years to come simply because their parents thought they were doing the right thing and 'helped them out'. If you can't afford a house, the answer is not to accept a handout from relatives, the answer is to wait until you can afford the house yourself, either by increasing your savings or by waiting for prices to come down to an affordable level.

I have no problem with the older generation holding more wealth than the younger generation, the older generation do have a lifetime of work, savings and investment behind them, there's noting wrong with accumalting some wealth along the way. What I object to is the way in which this opportunity is now being taken away from the younger generation who are finding that they need to spend an ever increasing amount of their income on a roof and 4 walls.

[bingobob]

What???

You have completely misunderstood my post. Probably on purpose.

Won't waste any effort trying to explain. Suspect your blinkers are too firmly fixed.

Sorry for any offence. You are of course correct, house prices will continue to rise at the rate of at least 10% per year, they always have done and always will do and this is and always will be a good thing. Again I apologise, I will buy the Mail on Sunday tomorrow and read it cover to cover, I shall then sit back and look forward to the day that my house has trebled in 'value'.

[Venger]

You get three EAs round. You're aware that prices have been creeping up a bit, but the valuations they give make your eyes pop.

Over twice what you paid for it.

'Surely not!' you say.

'Oh, yes,' they say. 'Market's going crazy - just like 2006 all over again, if you remember that far back. Could get you £XK in a week - maybe even sealed bids for a bit more.'

And you think of all the poor, yet-again priced-out FTBs, and nobly say, 'Look, I don't feel happy with that at all - I only paid £YK for it - price it at that + 10%.'

Yes, of course you will.

And in other markets, your scenario would likely be a good signal to go STR. Be happy with what you asking price can get. If you have people offering you a crazy sum to buy, then you would be crazy not to take it. The STRs should feel no guilt for that. Even those late STRs, who have discounted rapidly in order to find a buyer and get out. Markets. People win and lose by their own decisions in the markets, normally, even if they claim they shouldn't suffer for they listened to Boom Gordon who they thought they could rely on.

Except in the market of today and the past few years, after the mania, prices haven't been allowed to crash as they would have ordinarily done so because of extraordinary market intervention, including QE and 500 year low interest rates. So the STRs haven't seen much return for their decision as they otherwise would have done.

Massive intervention to prevent it, bailing out the suckers who overpaid, and supporting values for other holders of property. Many of whom have seen the value multiply x100 over the decades. And of course, the FTBs as well, who to me are more important than the STRs, also haven't had any real look in, with cheaper property prices.

Things must be pretty desperate out there now if BBC breakfast primetime is putting on expert-idiots calling for more BOMAD money to try and get the market going. A few more consequences of all the intervention having other negative effects, and the market will be set to get properly crashing.

[deeplyblue]

Without getting too personal, you can argue that you have been neither greedy nor selfish, but I would argue that you have been ignorant in so far as you have helped your children make what is potentially the worst financial decision of their lives. You accept that house prices defy common sense yet you still encourage your children to pay those prices, thereby helpimg to sustain prices that defy common sense. The children are feckless for accepting the help because they lack the imagination to try and think of another way through life other than over paying for a house and taking on potentially crippling mortgage debt. If young people in this country simply said 'no, it's too expensive, I don't think I'll bother buying', house prices would fall to a sustainable level.

I don't know the ins and outs of your situation obviously and I wouldn't want to comment on your sitiuation directly. However what I would say is that there are young people that will be stuck with a millstone around there neck for years and years to come simply because their parents thought they were doing the right thing and 'helped them out'. If you can't afford a house, the answer is not to accept a handout from relatives, the answer is to wait until you can afford the house yourself, either by increasing your savings or by waiting for prices to come down to an affordable level.

I let my children make their own decisions. I discussed the crazy state of the housing market with them, to be sure that I was not in possession of more facts than they were (possible, since I'd been watching the housing market longer than they had). It rapidly became clear that they knew the risks (as much as anyone without a crystal ball did), and had a taken their own decisions. They were both in their 30s, and too old for me to be telling them where to live. They had decided that they could afford the mortgage involved - and my son was scarily good with money as a teenager, and hadn't learned irresponsibility since.

However, once they had come to their decisions, we said that we were worried about the way the market was going, and would like to help them take slightly less of a mortgage burden on. Later this enabled my DiL to stay at home for a year beyond her maternity leave, to the benefit of her own health, and everyone's happiness. The important point is that we had not encouraged them to over-extend themselves, but tried to help build a little more slack into the system.

When we were younger, we went through several periods where we had so little slack in the system that the strain seriously diminished the quality of our lives - not through irresponsibility, but some bad luck (medical details private), and some bad (professional) advice. And this on a mortgage which was the sort that most people with families would only dream of now - but we thought the mortgage rate was going up to 15% at one point. So we knew how much difference a little more capital can make.

They now need to move again, and we may offer them a little more help this time - we're not martyrs and won't give what we can't afford. We will offer them a little extra with the proviso that they buy somewhere with a downstairs w.c., to make a visit by someone who may be unable to climb stairs soon more possible. That is a simple bargain - you will have to pay more for this, we think that you should not have to bear the cost.

I have no problem with the older generation holding more wealth than the younger generation, the older generation do have a lifetime of work, savings and investment behind them, there's noting wrong with accumalting some wealth along the way. What I object to is the way in which this opportunity is now being taken away from the younger generation who are finding that they need to spend an ever increasing amount of their income on a roof and 4 walls.

As I have said already, we are in agreement that this situation is undesirable, and I think that there should probably be a regulatory framework in place which could be used to try to keep the worst of these excesses in check. Though I notice also that the situation in the rest of the country is not the same as the SE, and London (they tell me) is different again. I am perhaps a little bit less sympathetic to the problems of the SE, since I lived through the days when "Northern unemployment is an acceptable price for curbing southern inflation." And now we have to listen to people mocking us as idlers for the unemployment that was deliberately created to maintain their wealth. (Sorry, old grievance cutting in)

There is, however, another factor which I think you need to bear in mind. Those of us who have seen the cost of putting our parents' generation into private care homes are becoming all too aware of the likely cost to us when we reach that stage. For some of the time may not be that far off. It against the time where we may need £900 (2010 prices) a week to live somewhere where we will not be tied to our chairs or sedated 24 hours a day to keep us from being any trouble that some of us get really antsy about keeping capital available which can be turned into income. Most of us do not regard that as "unfair", but it is an ever-present worry to some of us, especially in any family where disability has struck early. These figures can loom as large in our calculations as the problem of the mortgage looms in yours.

There are those who say that the obvious answer is to solve both problems at once. When the house is larger than the parents need, the now-adult children move in and raise their kids in one part of the house, whilst the parents live in another part, and share the cost and attention burden of raising the kids. It is the solution taken for granted in many parts of the world. As the parents get more and more dependent, the "children" accept that looking after the parents is part of the price of having a house with only a small, or a non-existent mortgage. I don't think that in this country we will easily adapt to that solution - especially with people expecting to move across the country, or even across the world, in search of better employment. It is possible, however, that we may have to re-examine our attitudes to the extended family, if the problems of housing for young adults and the frail elderly are to be tackled.

db

(sorry if this post has typos, I'm too tired tonight to proof-read)

[Mrs Bear]

Sorry for any offence. You are of course correct, house prices will continue to rise at the rate of at least 10% per year, they always have done and always will do and this is and always will be a good thing. Again I apologise, I will buy the Mail on Sunday tomorrow and read it cover to cover, I shall then sit back and look forward to the day that my house has trebled in 'value'.

Oh, dear, you still don't get it.

For the record, as I have stated in previous posts, I wouldn't care if the value of my own house dropped 50% tomorrow, if it would help my own children and everybody else's.

My point was that a good many people who castigate homeowners for their 'greed' would almost certainly behave exactly the same way themselves, given the same circumstances. Much as we might wish it otherwise, the vast majority of us have about as much control over house prices as we do over the price of bread, petrol or gold.

[bingobob]

I let my children make their own decisions. I discussed the crazy state of the housing market with them, to be sure that I was not in possession of more facts than they were (possible, since I'd been watching the housing market longer than they had). It rapidly became clear that they knew the risks (as much as anyone without a crystal ball did), and had a taken their own decisions. They were both in their 30s, and too old for me to be telling them where to live. They had decided that they could afford the mortgage involved - and my son was scarily good with money as a teenager, and hadn't learned irresponsibility since.

It seems that you've thought things and hopefully your children have enough equity to see them through a sticky patch or are living in a home that will meet their needs for years to come. I've seen enough from both the crash in the UK of the late 80's and the current crash across the Irish sea to know that things don't always end so well. I currently know of more than one young, professional couple in Ireland that are trying to bring up families in 2 or even 1 bedroom apartments. They are hundreds of thousands of euro in negative equity and their only realistic way out is through bankruptcy. None of these people could have bought woithout help from BOMAD. I even know of one example where the parents are still insisting that the initiual loan that they gave their son to get them on the housing ladder is still paid back in full.

.

When we were younger, we went through several periods where we had so little slack in the system that the strain seriously diminished the quality of our lives - not through irresponsibility, but some bad luck (medical details private), and some bad (professional) advice. And this on a mortgage which was the sort that most people with families would only dream of now - but we thought the mortgage rate was going up to 15% at one point. So we knew how much difference a little more capital can make.

Interest rates are going to be interesting moving forward, people talk of a 15% mortgage rate as though it will never happen again, but I personally think it is more likely that we will see rates that high in the next 10 to 15 years than we won't. People are already paying 5 or 6% interest with a BoE base rate of 0.5%, I don't think we can bank on the old rules playing out as we'd expect them to.

Though I notice also that the situation in the rest of the country is not the same as the SE, and London (they tell me) is different again. I am perhaps a little bit less sympathetic to the problems of the SE, since I lived through the days when "Northern unemployment is an acceptable price for curbing southern inflation." And now we have to listen to people mocking us as idlers for the unemployment that was deliberately created to maintain their wealth. (Sorry, old grievance cutting in)

Being from the South East myself, I'd never thought of things from that angle before. I take it you're not a fan of thatcher then

There is, however, another factor which I think you need to bear in mind. Those of us who have seen the cost of putting our parents' generation into private care homes are becoming all too aware of the likely cost to us when we reach that stage. For some of the time may not be that far off. It against the time where we may need £900 (2010 prices) a week to live somewhere where we will not be tied to our chairs or sedated 24 hours a day to keep us from being any trouble that some of us get really antsy about keeping capital available which can be turned into income. Most of us do not regard that as "unfair", but it is an ever-present worry to some of us, especially in any family where disability has struck early. These figures can loom as large in our calculations as the problem of the mortgage looms in yours.

There are those who say that the obvious answer is to solve both problems at once. When the house is larger than the parents need, the now-adult children move in and raise their kids in one part of the house, whilst the parents live in another part, and share the cost and attention burden of raising the kids. It is the solution taken for granted in many parts of the world. As the parents get more and more dependent, the "children" accept that looking after the parents is part of the price of having a house with only a small, or a non-existent mortgage. I don't think that in this country we will easily adapt to that solution - especially with people expecting to move across the country, or even across the world, in search of better employment. It is possible, however, that we may have to re-examine our attitudes to the extended family, if the problems of housing for young adults and the frail elderly are to be tackled.

Yes, the cost of care for the elderly, another big fat elephant in the room. I suppose you could argue that the younger generation would also benefit from high house prices because eventually they would inherit their parents estate and that would allow them to live with prices at their current level (although that won't help those that don't inherit houses), but even that is being taken away now. Obviously the wealth is going somewhere and a lot of young, Eastern European and SE Asian care nurses etc will be receiving a salary to look after you, but something tells me they won't be the ones propping up the UK housing market. I've noticed that many of the houses that are currently sitting on the market at ridiculous prices for literally years seem to be probate properties, it seems that the traditional buyers of these houses just cannot afford them anymore and I think we mind find ourselves in a situation where the market is being squeezed at both ends.

The concept of children living with their eldery parents is one that we should look to embrace perhaps, but I think this would only work in this country where there is only one child. From time I have spent working in SE Asia (and I am by no means an expert), I believe the tradition is that the youngest daughter remains in the house with her husband to look after the elderly parents, when the parents die, she would then inherit the house. This works fine where the house is worth a few thousand dollars at most, somehow I can't see the same thing working here!

[Bloo Loo]

Deficit spending has a lot to answer for.

[Democorruptcy]

Deficit spending has a lot to answer for.

Just watched Milliband's Andrew Marr interview on BBC news where he said that Labour didn't overspend.

I've never seen such a large portion of the news given up to just one interview.

[Bloo Loo]

Just watched Milliband's Andrew Marr interview on BBC news where he said that Labour didn't overspend.

I've never seen such a large portion of the news given up to just one interview.

sure, a government overspend is different to anyone elses overspend.

what they mean is they didnt exceed their budget....Ok, the budget was an overspend...course, ANY deficit is an overspend, but not in Sir Humphrey speak.