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Bank Of Mum And Dad Lends £5Bn A Year In Uk

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http://www.bbc.co.uk/news/business-36181318

'Bank of mum and dad' lends £5bn a year in UK, says L&G

Lending from parents to help their children get on the UK property ladder will amount to £5bn in 2016, according to data from Legal & General (L&G).

L&G says it means the so-called Bank of Mum and Dad will help to finance 25% of all UK mortgage transactions this year - at an average amount of £17,500.

If this lending prowess was combined into a formal business, it would be a top 10 UK mortgage lender, adds L&G.

But it warns this method of lending is coming under increasing pressure.

"The Bank of Mum and Dad plays a vital role in helping young people to take their early steps on to the housing ladder," said Legal and General chief executive Nigel Wilson.

But he said it highlighted a number of important issues, including house prices being "out of sync with wages".

Many of those accepting money from their parents are being given substantial sums.

Dan Howdle, bought three-bedroom semi-detached a year ago in Rugeley in the West Midlands, thanks to £50,000 from his parents.

"I wouldn't have had a chance of doing it without them, certainly for the next five years," Mr Howdle, who works for a broadband company, told the BBC.

"Before this gift, I was expecting to be a renter for the rest of my life," he said.

'Supply side'

In London, Mr Wilson said this funding method was reaching "tipping point", with more than half of average household net wealth (excluding property assets) going towards helping their offspring on to the housing ladder.

Mr Wilson also said that not all young people were able to access parental support, while many who could were still unable to afford a home.

He added: "We need to fix the housing market by revolutionising the supply side - if we build more houses, demand can be met at a sensible level and prices will stabilise relative to wages."

Research from L&G and economics consultancy Cebr suggests the Bank of Mum and Dad will provide deposits for more than 300,000 mortgages, purchasing homes worth £77bn this year.

The Bank of Mum and Dad's average financial contribution is £17,500 or 7% of the average purchase price, it says.

Suprised to see this on the BBC.

Just shows the lunancy of the problem.

I wonder where house prices would be if BOM&D didn't bail their children out?

Edited by cool_hand

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Typical characteristics of BOMAD

- Lending at 0% rate (wayay, we can compete with the big boys)

- No fees

- Variable terms, pay me back when you can, as much as you can afford

- In some or even most cases it is written off and becomes a gift (don't worry Mr Tax man, you'll probably be first to know)

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Thats not really a lot, in the scheme of things, is it?

It's 7% accoriding to the article.

The Bank of Mum and Dad's average financial contribution is £17,500 or 7% of the average purchase price, it says.

So average house price £250,000 accroding to this? I'd like to buy a house for £250,000.

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Thats not really a lot, in the scheme of things, is it?

25% of transactions, and it's not a lot? Probably the biggest single factor in the continuance of HPI. Like BTL (essentially the same people), BOMAD recycles gains from HPI back into the lower tiers to keep the whole thing going otherwise it collapses under it's own weight.

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25% of transactions, and it's not a lot? Probably the biggest single factor in the continuance of HPI. Like BTL (essentially the same people), BOMAD recycles gains from HPI back into the lower tiers to keep the whole thing going otherwise it collapses under it's own weight.

No, the average amount being stumped up.

Just as well, as itll be lost.

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Thats not really a lot, in the scheme of things, is it?

I suspect it is more than that....anyhow where and how do they get this £5 bln figure from?.......are the parents withdrawing equity from their own property as debt or selling the BTL to raise the funds?..

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And if you have no mum and dad?

Exactly..... You are doomed to work the rest of your life for others....or go cap in hand to welfare for help?

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And if you have no mum and dad?

I will refer to the works of Thomas Piketty, Capital In the 21st Century.

With no inherited wealth. You're going to have a hard time.

Edited by 200p

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I will refer to the works of Thomas Piketty, Capital In the 21st Century.

With no inherited wealth. You're going to have a hard time.

Inherited wealth has not been a problem when there was enough to go around and a wage could cover for the basics in life.....what we have now is fewer people holding greater wealth, normal wages alone unable to buy what they used to buy, inheritance being spent on living, savings being erroded by inflation and a pension built from a lifetime of saving worth a fraction of what it used to be....the times are rapidly changing indeed.;)

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25% of transactions, and it's not a lot? Probably the biggest single factor in the continuance of HPI. Like BTL (essentially the same people), BOMAD recycles gains from HPI back into the lower tiers to keep the whole thing going otherwise it collapses under it's own weight.

Yes and no. If we're talking an average of £17.5k then it's not unreasonable to suggest that some of the lower value 'loans' come from savings or perhaps from raiding the pension pot. Some of it will also be from MEW of that there is little doubt, but its worth remembering the potential saving power of a parent in their 50/60s, if they bought their family home 15+ years ago they'd have benefited from low prices and from recent low interest rates. So either they pay next to nothing (assuming they haven't MEW'd) or have paid off their mortgage.

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Lets look at this logically....

Mum and dad make massive gains on housing.

Mum and dad gives children their savings to invest in housing.

Now, I know I am no expert and studying arithmetic at primary school is no guarantee I know what I am talking about but it seems to me that:

!!! IT'S A F**KING PONZI !!!!

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Typical characteristics of BOMAD

- Lending at 0% rate (wayay, we can compete with the big boys)

- No fees

- Variable terms, pay me back when you can, as much as you can afford

- In some or even most cases it is written off and becomes a gift (don't worry Mr Tax man, you'll probably be first to know)

You missed out....

- their own house price is maintained/increases.

As I said....

!!! IT'S A F**KING PONZI !!!

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How old are these parents that are gifting lump sums to their kids?.....if in their 50s and 60s are they taking out big mortgages and extending their working lives for another 10 or 20 years?.....downsizing? or using the 25% tax free pension lump sum?

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How old are these parents that are gifting lump sums to their kids?.....if in their 50s and 60s are they taking out big mortgages and extending their working lives for another 10 or 20 years?.....downsizing? or using the 25% tax free pension lump sum?

MSM said savings....I say MEWING :lol:

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I think it's a fairly substantial driver based on those figures.

I also think that BOMAD will change their tune very quickly once the economic tide turns, and whilst they might have been prepared to to lend an umbrella in the sunshine, they'll tw4t you round the head with it and run like **** once it starts raining.

I reckon a 10% drop in their own house price would be enough to put a stop to the vast majority of BOMAD transactions. Average mum and dad, two kids, £17,500 BOMAD loan per kid = £35k. So it won't even take a 10% drop to wipe that off the value of their average family house.

And 10% isn't even half the froth in my area.

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Gross lending in 2015 on mortgages was £220bn, so although the £5bn does not immediately look large but then you have to remember that this money is used as a deposit so actually enables borrowing of £45bn at 90% LTV.

A lot of this I think is from baby boomers that not only benefit from great pensions, massive rises in house prices, decent wages but now are working longer than they were expected too which has made some even more flush... Is it sustainable though? Possibly but they will home ownership depend on how much your parents have earn't?

Out of interest does the the bank of mum and dad include grandparents?

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In my experience it is rare to find a FTB who has not had a helping hand from the BOMAD. If you do not have parents who can afford to finance your property purchase then you are at an extremely large disadvantage.

£17.5k would mean £70k total for my parents' four children. There's no way they have that kind of money to spare. So I have to save an extra couple of years to bridge the gap, by which time house prices will have been bid up even further by people who do have access to family money.

The way the system works now you effectively have to have rich parents (and no siblings) to have a house. BOMAD should be banned.

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