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Sancho Panza

Bank of Mum and Dad now playing vital role in private rented sector

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Property Industry Eye 29/8/17

'The Bank of Mum and Dad has long been an active lender in helping offspring buy their homes – but a new report out today says it is also playing a pivotal role in the rental market.

Legal & General and CEBR (Centre for Economics & Business Research) have published new research which shows that the Bank of Mum and Dad will fund £2.3bn billion of rental payments this year.

Parents are now helping 9% of renters across the UK with their rent on nearly 460,000 properties. One in ten renters have also used parental money to pay for deposits, while some parents have also helped pay letting agent fees.

Previous Legal & General/CEBR research showing the Bank of Mum and Dad will support £6.5bn of lending to first-time buyers to get on the property ladder this year means the Bank of Mum and Dad will fund some £8.8bn this year helping children to either rent or buy a home.

Dan Batterton, fund manager of L & G’s build to rent business, said: “We have been tracking the role of the Bank of Mum and Dad for some years now – but this is the first time we’ve looked at its role in the rental market and the results are concerning.

“It is a real challenge for young people who are reliant on parental hand-outs just to pay the rent.

“Parents want to help their kids get on in life, and the Bank of Mum and Dad is a testament to their generosity, but it is also a symptom of our broken housing market.

“The UK is experiencing a supply-side crisis in the rental sector. We need more professional, affordable tenures and more choice for renters. We need to build more homes for the young, old and families alike – more quickly and cost effectively.

“Renters are currently facing not only expensive rental payments but moving costs, agent fees and deposits which are reducing flexibility – something that should be a benefit of renting.”

Unsurprisingly, the Bank of Mum and Dad’s payments to the rental sector are highest in London and the east of England, lending £626m and £604m in these areas respectively. It also funds £175m of rental payments in the North-West and £369m in Yorkshire & the Humber'

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OK, so with about 5.3 million homes in the PRS (as per 2014 figures in the DCLG Live table 101) is we assume an average rent of, say, £700 pcm then we have an annual rental bill of over £40bn making this BOMAD contribution about 5% of the flow. Non-trivial.

It's almost as if empowering the banks and various speculators to dial house prices up to mad levels was a bad idea. Who would have predicted that?

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6 hours ago, Sancho Panza said:

Property Industry Eye 29/8/17

'The Bank of Mum and Dad has long been an active lender in helping offspring buy their homes – but a new report out today says it is also playing a pivotal role in the rental market.

Legal & General and CEBR (Centre for Economics & Business Research) have published new research which shows that the Bank of Mum and Dad will fund £2.3bn billion of rental payments this year.

Parents are now helping 9% of renters across the UK with their rent on nearly 460,000 properties. One in ten renters have also used parental money to pay for deposits, while some parents have also helped pay letting agent fees.

Previous Legal & General/CEBR research showing the Bank of Mum and Dad will support £6.5bn of lending to first-time buyers to get on the property ladder this year means the Bank of Mum and Dad will fund some £8.8bn this year helping children to either rent or buy a home.

Dan Batterton, fund manager of L & G’s build to rent business, said: “We have been tracking the role of the Bank of Mum and Dad for some years now – but this is the first time we’ve looked at its role in the rental market and the results are concerning.

“It is a real challenge for young people who are reliant on parental hand-outs just to pay the rent.

“Parents want to help their kids get on in life, and the Bank of Mum and Dad is a testament to their generosity, but it is also a symptom of our broken housing market.

“The UK is experiencing a supply-side crisis in the rental sector. We need more professional, affordable tenures and more choice for renters. We need to build more homes for the young, old and families alike – more quickly and cost effectively.

“Renters are currently facing not only expensive rental payments but moving costs, agent fees and deposits which are reducing flexibility – something that should be a benefit of renting.”

Unsurprisingly, the Bank of Mum and Dad’s payments to the rental sector are highest in London and the east of England, lending £626m and £604m in these areas respectively. It also funds £175m of rental payments in the North-West and £369m in Yorkshire & the Humber'

From where they get the figures? Based on Survey?

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Very scary when BOMAD becomes needed for even the financialised bit of the equation (Rent, that is).

Complete saturation point. Next, boomer parents find out they're actually poor and have nothing to retire on and their children have zero capital, no retirement plans and no ability to ever increase their earnings enough. 

Two ways this can go: Asset price collapse or hyperinflation. 

 

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10 minutes ago, stuckmojo said:

Very scary when BOMAD becomes needed for even the financialised bit of the equation (Rent, that is).

Complete saturation point. Next, boomer parents find out they're actually poor and have nothing to retire on and their children have zero capital, no retirement plans and no ability to ever increase their earnings enough. 

Two ways this can go: Asset price collapse or hyperinflation. 

 

It's an unsustainable situation, something has to give.

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7 hours ago, Bland Unsight said:

OK, so with about 5.3 million homes in the PRS (as per 2014 figures in the DCLG Live table 101) is we assume an average rent of, say, £700 pcm then we have an annual rental bill of over £40bn making this BOMAD contribution about 5% of the flow. Non-trivial.

It's almost as if empowering the banks and various speculators to dial house prices up to mad levels was a bad idea. Who would have predicted that?

Housing benefit is £23 billion, if we assume that half of housing benefit goes to the PRS then housing benefit is 30% of the private rental market. Or put another way, without any housing benefit in the PRS, average rents would drop to about 400-450 pcm ...

If your a private renter you paying twice for housing benefit - once through inflated rents and twice through taxation.

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Both myself and my partner have had to help our respective children with rent and deposits.  I did get the six months rent I lent my offspring back (so they could rent a house the agent thought they couldn't afford); my partner has been less fortunate.  I really can't imagine any of our children will be in a similar position in 30 years time.

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1 hour ago, stuckmojo said:

Very scary when BOMAD becomes needed for even the financialised bit of the equation (Rent, that is).

Complete saturation point. Next, boomer parents find out they're actually poor and have nothing to retire on and their children have zero capital, no retirement plans and no ability to ever increase their earnings enough. 

Two ways this can go: Asset price collapse or hyperinflation. 

 

Massively deflationary or massively inflationary economic depression  - always the endgame once you allow the banks to blow an utterly massive credit bubble and resist all market forces that attempt to correct it naturally.

The banks broke the financial system in the run up to the 2008 crash by overextending their creation of credit and the governments responded by enabling even more credit creation and allowing the banks to become even bigger when they were already deemed 'too big to fail', instead of breaking them down into manageable units that could fail 'safely'.

It's pretty obvious when the next crisis emerges, they'll just ramp up money printing and bank bailouts/backdoor support even more ... either succeeding in kicking the can down the line for a couple more years .. or precipitating a crack-up boom.

 

 

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4 minutes ago, Sour Mash said:

Massively deflationary or massively inflationary economic depression  - always the endgame once you allow the banks to blow an utterly massive credit bubble and resist all market forces that attempt to correct it naturally.

The banks broke the financial system in the run up to the 2008 crash by overextending their creation of credit and the governments responded by enabling even more credit creation and allowing the banks to become even bigger when they were already deemed 'too big to fail', instead of breaking them down into manageable units that could fail 'safely'.

It's pretty obvious when the next crisis emerges, they'll just ramp up money printing and bank bailouts/backdoor support even more ... either succeeding in kicking the can down the line for a couple more years .. or precipitating a crack-up boom.

 

 

Gidiot had a chance to draw the line at Brown.

Fcked up.

Lab + COns will be blamed equally for the upcoming mess.

 

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25 minutes ago, Sour Mash said:

Massively deflationary or massively inflationary economic depression  - always the endgame once you allow the banks to blow an utterly massive credit bubble and resist all market forces that attempt to correct it naturally.

The banks broke the financial system in the run up to the 2008 crash by overextending their creation of credit and the governments responded by enabling even more credit creation and allowing the banks to become even bigger when they were already deemed 'too big to fail', instead of breaking them down into manageable units that could fail 'safely'.

It's pretty obvious when the next crisis emerges, they'll just ramp up money printing and bank bailouts/backdoor support even more ... either succeeding in kicking the can down the line for a couple more years .. or precipitating a crack-up boom.

 

 

Hard to call it, the madness lasted longer than I thought it could last time (2008). Two years 'feels' about right; especially with Brexit.

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46 minutes ago, spyguy said:

Gidiot had a chance to draw the line at Brown.

Fcked up.

Lab + COns will be blamed equally for the upcoming mess.

 

Fecd up ?

How so...Himself , his family and all his mates have made a fortune from his policies as far as I can tell.

He's done exactly what he had hoped me thinks

We've f**ked up by letting him

 

 

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14 minutes ago, GrizzlyDave said:

Hard to call it, the madness lasted longer than I thought it could last time (2008). Two years 'feels' about right; especially with Brexit.

The governments sure as hell won't choose deflation through allowing the banking system to implode with the resulting chaos and drying up of credit.  They'll be printing massive amounts of  new money, suppressing interest rates to as near zero as possible and making sure the banks stay solvent on paper by bailing them out through the back door and probably every other door too.  We know this because they already did it and the crisis will be bigger this time.

Aside from anything else, being massive debtors and running a huge structural deficit, the government can't afford interest rates to be high as that implies bond yields are high too.  They must keep their own borrowing costs down and that means money printing and supporting the market for their own bonds.  The side effect is reckless lending, speculation and asset bubbles all over the place.  

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2 minutes ago, Sour Mash said:

The governments sure as hell won't choose deflation through allowing the banking system to implode with the resulting chaos and drying up of credit.  They'll be printing massive amounts of  new money, suppressing interest rates to as near zero as possible and making sure the banks stay solvent on paper by bailing them out through the back door and probably every other door too.  We know this because they already did it and the crisis will be bigger this time.

Aside from anything else, being massive debtors and running a huge structural deficit, the government can't afford interest rates to be high as that implies bond yields are high too.  They must keep their own borrowing costs down and that means money printing and supporting the market for their own bonds.  The side effect is reckless lending, speculation and asset bubbles all over the place.  

Sounds like Japan, but prices crashed there?

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2 hours ago, stuckmojo said:

Very scary when BOMAD becomes needed for even the financialised bit of the equation (Rent, that is).

Complete saturation point. Next, boomer parents find out they're actually poor and have nothing to retire on and their children have zero capital, no retirement plans and no ability to ever increase their earnings enough. 

Two ways this can go: Asset price collapse or hyperinflation. 

 

Agreed,but i think we are getting both.Asset price collapse in houses is pretty certain (mostly bubble areas).Wealth destruction i call it,as that is what it is.Hyperinflation we wont get,but i am seeing inflation rates running at 10%+ by 2015 and rates at levels to contain that.People will laugh at such ideas.Rates are never going up etc.They are wrong and dont understand cycles,They are about to be educated in a way that they will be telling their grandchildren about.

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1 hour ago, dougless said:

Both myself and my partner have had to help our respective children with rent and deposits.  I did get the six months rent I lent my offspring back (so they could rent a house the agent thought they couldn't afford); my partner has been less fortunate.  I really can't imagine any of our children will be in a similar position in 30 years time.

Dont people haggle these days.

 

"£1K for that, you must be mad, i'll give you £100."

 

That sort of thing.

 

I fear BOMAD think these prices are normal based on their unearned untaxed insane paper gains

 

 

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1 hour ago, durhamborn said:

Agreed,but i think we are getting both.Asset price collapse in houses is pretty certain (mostly bubble areas).Wealth destruction i call it,as that is what it is.Hyperinflation we wont get,but i am seeing inflation rates running at 10%+ by 2015 and rates at levels to contain that.People will laugh at such ideas.Rates are never going up etc.They are wrong and dont understand cycles,They are about to be educated in a way that they will be telling their grandchildren about.

? Did you mean 2025?

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2 minutes ago, fru-gal said:

? Did you mean 2025?

Yes fru-gal ,2025,whats ten years to a central bank though.What is it they say "lower for longer".?.Will they be saying higher for longer in 2025?.Maybe.

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My mum told me this weekend about one friend she has who gives her son regular hand-outs even though she is only on the state pension (he is in his early 50s)

 

Another friend (no kids), gives her nephew £400 a month (he is in his 40s)

 

I was in a state of shock!

Edited by reddog

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31 minutes ago, reddog said:

My mum told me this weekend about one friend she has who gives her son regular hand-outs even though she is only on the state pension (he is in his early 50s)

 

Another friend (no kids), gives her nephew £400 a month (he is in his 40s)

 

I was in a state of shock!

That is crazy! Boomers dishing out money left right and centre ... 

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and what about all those boomers that still have their 40+ year old offspring living with them at home...they all thought it was a good idea voting for political parties that promoted HPI and prevented house building but they are going to have to reap the consequences - we all are.

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  • 293 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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