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Sancho Panza

First-Time Buyers: Two-Thirds Get Parental Help

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Telegraph 6/2/14

'First-time buyers in their mid-twenties and early thirties are benefiting from a “golden age of inheritance” when buying property. In 2012, 43pc of people aged 25-36 owned their own home. Of the first-time buyers who bought in 2012, 64pc received financial help from their parents.

But it is unlikely future generations will be able to help their offspring in the same way, warns HSBC, the bank which undertook this research.

Its findings, published today, showed how much harder it is for 25-36 year-olds to afford a property now than it was for their parents, thanks to bigger deposits, higher house prices and stricter mortgage lending criteria than previous generations.

The study showed the parents of first-time buyers are now typically in their mid-50s. They were able to buy their first home in 1983 aged between 27 and 28. They then moved to their second home at age 31 and paid off their mortgage, on average,last year, at 56.

Their children who have bought a property typically did so at age 29, will move into their second home at 36 and pay off the mortgage at 61.

In 1983, the average first-time buyer paid £17,021 for their home with a deposit of £1,021 and a mortgage of £16,000.

The average borrower had an income of £8,316 and the average deposit as a percentage of income was 12pc.

Today, the average first-time buyer spends £147,000 on their first home, with a 20pc deposit of £29,400 and a mortgage worth £117,600. The average income is £35,918 and the average deposit as a percentage of income is 82pc – eight times that of their parents in 1983.

Even with a deposit of just 5pc, this would be 20pc of first-time buyers’ annual income – almost twice that required by their parents.

Of those aged 25-36 who have not bought a home, more than a quarter say they never expect to be able to buy. The remaining 73pc expect to buy at around age 35 and move to their second home at 42 – however the research suggest they are not saving enough to achieve this, with a quarter saving nothing at all.

HSBC_first-time_bu_2813096c.jpg

HSBC said as the average age of first-time buyers increases and borrowers continue paying off their mortgage until later in life, many will not be in a position to gift money to their children.

Future generations will also be hit by a predicted fall in inheritance levels, according to the bank.

The parents of today’s 25-36 year-olds collectively plan to leave the most inheritance compared with any other current generation – 61pc plan to leave an average of £226,841.

Taking into account life expectancy, HSBC predicts the peak of inheritance will come in 2047 when £1.1 trillion will be left. However, once this wealth has been passed down, it suggest that the level of inheritance to be received in the UK by future generations will fall dramatically, as the value is eroded by the rising cost of living and life expectancy.'

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First-time buyers in their mid-twenties and early thirties are benefiting from a “golden age of inheritance” when buying property.

In 2012, 43pc of people aged 25-36 owned their own home. Of the first-time buyers who bought in 2012, 64pc received financial help from their parents.

The article doesn't distinguish between parental "help" in the form of a cash gift or the form of a loan. Many of the early 30somethings I know who bought in the last few years were loaned the deposit by their parents. It's not really an inheritance if you're expected to pay it back one day.

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The article doesn't distinguish between parental "help" in the form of a cash gift or the form of a loan. Many of the early 30somethings I know who bought in the last few years were loaned the deposit by their parents. It's not really an inheritance if you're expected to pay it back one day.

How many of those who "borrowed" money from their parents have any intention of paying it back. Were contracts involved? Isn't it just a way of fudging the etiquette/pride problem of asking for a handout?

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The article doesn't distinguish between parental "help" in the form of a cash gift or the form of a loan. Many of the early 30somethings I know who bought in the last few years were loaned the deposit by their parents. It's not really an inheritance if you're expected to pay it back one day.

Capital gift or loan?

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How many of those who "borrowed" money from their parents have any intention of paying it back. Were contracts involved? Isn't it just a way of fudging the etiquette/pride problem of asking for a handout?

Absolutely.

Edit to add:the middle classes in this country have lined themselves up to get rinsed.

Edited by Sancho Panza

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[Reminds me of my mate who got all his friends and family into an online pyramid scam he made a few quid out of it and was lending some of his profits to his mum to keep investing so she could get a return.....

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The article doesn't distinguish between parental "help" in the form of a cash gift or the form of a loan. Many of the early 30somethings I know who bought in the last few years were loaned the deposit by their parents. It's not really an inheritance if you're expected to pay it back one day.

From my anecdotal experiance - they tend to be informal loans which are intended to get matched off against inheritance in due course (or all cancelled when all kids have received equally)

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How many of those who "borrowed" money from their parents have any intention of paying it back. Were contracts involved? Isn't it just a way of fudging the etiquette/pride problem of asking for a handout?

See my post above...it's actually a way to sustain a pyramid scheme....for a short while

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Erm, this has been happening for years. Or rather, generations. My parents had help, theirs did etc. and now I've benefitted in much the same way. As per the above comment, it's not a matter that has much relevance unless parents are acutally borrowing to do so. I think this is probably the only genuine 'trickle down' economics ;-)

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Zero sum? Without the bubble it wouldn't be needed by the kids and wouldn't be available from the parents ? It just shifts the housing affordability problem down a generation.

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Everything in the OP is insane when you consider it

I'm so glad I was prevented from buying a house and that I currently have no interest in buying a house.

Just don't want to be any part of the madness.

Although of course I am involved indirectly by living in a country with an House Price Inflated cost of living :angry:

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Erm, this has been happening for years. Or rather, generations. My parents had help, theirs did etc. and now I've benefitted in much the same way. As per the above comment, it's not a matter that has much relevance unless parents are acutally borrowing to do so. I think this is probably the only genuine 'trickle down' economics ;-)

It is relevant in that had the money been invested elsewhere maybe, the family wealth or gained equity could have been preserved, this way it just disappears back into the imaginary money tree it came from. Many many recent buyers are going to hit trouble when rates rise.

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Everything in the OP is insane when you consider it

I'm so glad I was prevented from buying a house and that I currently have no interest in buying a house.

Just don't want to be any part of the madness.

Although of course I am involved indirectly by living in a country with an House Price Inflated cost of living :angry:

Yes, you live in a country where there are a lot of very insane people, and to all intents and purposes they look okay, until they start talking about houses.........very sad actually.

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Zero sum? Without the bubble it wouldn't be needed by the kids and wouldn't be available from the parents ? It just shifts the housing affordability problem down a generation.

Worse than that...it moves the housing market to an exclusive club of equity/cash rich families.

Their family over-all looses nothing.

The only people that are affected at the poor/real FTBs.

The UK housing market is Britain's shame.

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Erm, this has been happening for years. Or rather, generations. My parents had help, theirs did etc. and now I've benefitted in much the same way. As per the above comment, it's not a matter that has much relevance unless parents are acutally borrowing to do so. I think this is probably the only genuine 'trickle down' economics ;-)

Thanks for joining to tell us that.

I'm mulling over an offer of parental help at the moment. Thankfully it is nothing to do with buying a house.

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Telegraph 6/2/14

In 1983, the average first-time buyer paid £17,021 for their home with a deposit of £1,021 and a mortgage of £16,000.

The average borrower had an income of £8,316 and the average deposit as a percentage of income was 12pc.

Today, the average first-time buyer spends £147,000 on their first home, with a 20pc deposit of £29,400 and a mortgage worth £117,600. The average income is £35,918 and the average deposit as a percentage of income is 82pc – eight times that of their parents in 1983.

:unsure: but I thought FTB couldn't afford deposits because they spend all their money on ipads and drinking ..

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:unsure: but I thought FTB couldn't afford deposits because they spend all their money on ipads and drinking ..

And.....wages went up for 20 years.

if your 30-50 you've not seen a pay rise in a decade,

If you are below 30 you will only see incomes diminish.

Still the 50+ lot are okay mate.

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Will the parents cover the extra £200+ payment for the 20% HTB loan that kicks in at five years?

Or if the kids decide to flog it prior to payoff, will the parents stump the 20% loan for the kids?

Expect to see a lot of tears over these events all over the interwebs.

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Makes sense to me; some of the people I see buying could in no way have saved a sizable deposit.

I won't get a penny from my parents but what can you do?

I've been saving for years instead.

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It is relevant in that had the money been invested elsewhere maybe, the family wealth or gained equity could have been preserved, this way it just disappears back into the imaginary money tree it came from. Many many recent buyers are going to hit trouble when rates rise.

That's very true. I will probably be able to afford to give my kids a whack when I hit 60 (15+years away). But I won't if they are going to use it for house mortgaging in the UK - effectively we would be just taking money out of the family and giving it to the government (stamp duty), other families who lucked out in timing, and lenders (mortgage interest draggers)

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That's very true. I will probably be able to afford to give my kids a whack when I hit 60 (15+years away). But I won't if they are going to use it for house mortgaging in the UK - effectively we would be just taking money out of the family and giving it to the government (stamp duty), other families who lucked out in timing, and lenders (mortgage interest draggers)

I think we will have a sizeable correction before then, it would be worth just buying them a flat or something when that happens, so they can live rent free, do their own thing, and build their own savings, but yes throwing it into the UK mortgage grinder is a complete waste of time at the moment.

Edited by dances with sheeple

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I spy spin in that story. Those parents in 1983 were not the average of that time: they were buying at well below the average FTB age (32 at the time), and they averaged well-above-average income.

A generation hence, there will be some parents helping their children. Those parents will tend to be among the well-to-do (who can afford it), and will probably also be disproportionately amongst those buying a house (often with parental help) in their 20s or early 30s.

It's a shame when they spin a story like that, because it tends to discredit the very valid central point (HPI is evil) amongst those not predisposed to support it.

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