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rantnrave

Bank of Mum and Dad 'feels the pinch'

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Could be significant for house prices?

http://www.bbc.co.uk/news/business-44283507

Parents are parting with thousands of pounds to help their children get on the property ladder, but they can't afford to lend as much as they used to.

The average parental contribution for home buyers this year will be £18,000, down 17% from last year's £21,600, according to Legal & General (L&G).

The drop shows that parents are "feeling the pinch", the firm says.

Nonetheless, more than one in four buyers are still expected to receive financial help from friends or family.

In total, financial services firm L&G said 27% of home buyers would get assistance - up from 25% last year.

Despite the smaller sums being loaned, L&G said the so-called Bank of Mum and Dad was still "a prime mover" in the UK housing market.

'My parents had put aside money to gift me'

Francesca Hunt, from London, was given between £20,000 and £30,000 (she does not want to say the exact amount) by her parents last year to help her buy a house.

She had enough money by herself for a deposit on a one-bed flat, but her parents thought a two-bedroom flat was a better investment.

"My parents decided that the price difference from a one to a two bed isn't, in the grand scheme of things, too much more," she says.

Francesca said her parents had already put aside money to gift her at some point.

"If not, I would have inherited the money anyway. Better to use it now to get on the property ladder before prices go up even further," she says.

The money her parents provided was "gifted" and Francesca says they don't own any of her flat as a result of their investment.

L&G said almost 317,000 housing transactions this year would rely on at least some parental help.

However, overall lending was expected to drop to £5.7bn this year from £6.5bn in 2017.

Where buyers live also has a big impact on how much they rely on their parents for help. In London, the average parental contribution is £31,000 compared with £11,000 in Scotland.

Bank of Mum and Dad in numbers

  • The "bank" is expected to help fund 317,000 homes his year, up 3% on 2017
  • Contributions are highest in London and lowest in Scotland
  • More buyers in London (41%) receive help from the Bank of Mum and Dad than in any other area
  • Under-35s are most likely to receive help from their parents, with nearly three in five getting assistance
  • Some older home buyers also rely on the Bank of Mum and Dad, with 20% of those aged between 45 and 55 receiving help

"People are feeling a bit of a pinch around the economy and therefore we're seeing pretty much a national trend outside of London for less to be given," L&G chief executive Nigel Wilson told the BBC.

"The volume of transactions depending on Bank of Mum and Dad funding keeps on growing, even as parents find it harder to provide as much money for the deposit."

He said it was not "sustainable or fair" for parents and young people to "remain so co-dependent when it comes to housing purchases".

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16 minutes ago, rantnrave said:

Francesca Hunt, from London, was given between £20,000 and £30,000 (she does not want to say the exact amount) by her parents last year to help her buy a house.

She had enough money by herself for a deposit on a one-bed flat, but her parents thought a two-bedroom flat was a better investment.

"My parents decided that the price difference from a one to a two bed isn't, in the grand scheme of things, too much more," she says.

Francesca said her parents had already put aside money to gift her at some point.

"If not, I would have inherited the money anyway. Better to use it now to get on the property ladder before prices go up even further," she says.

The money her parents provided was "gifted" and Francesca says they don't own any of her flat as a result of their investment.

 

They have also 'gifted' her a much larger mortgage as a result. Drug pushers.

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26 minutes ago, rantnrave said:

"My parents decided that the price difference from a one to a two bed isn't, in the grand scheme of things, too much more," she says. I wasn't taking on enough crippling debt.

 

27 minutes ago, rantnrave said:

"If not, I would have inherited the money anyway. Better to use it now to get on the property ladder before prices go up even further," she says.

I'm calling BS on this. 'Francesca from London' would have to be a hermit to not question current London fragility.

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Bomad can't afford to lend? Bomad too nervous to  lend? Or FTBs reluctant to buy?

This article is not analysing at all.

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I expect Francesca Hunt, from London may be an EA.  These contrived articles often involve VI input.

"Better to use it now to get on the property ladder before prices go up even further," she says. "  Classic stuff...without this fear and mania prices will not be sustained at their exceptional levels.  If you think about this for a moment Francesca from London is stretching to breaking point with family (and HMG) support to buy...someone is going to have to stretch even further to pay more than Francesca from London...is that likely?  It contradicts the thrust of the article which is that bank of M&D is drying up.  It is more likely that Francesca from London will be learning the meaning of negative equity and perhaps just as well Francesca from London went for the two bed given that this will be her forever home.

 

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BBC Radio 5 had a piece on this this morning, went something like this:

Host: So you're a BOMAD investor, how much did you loan?

BOMAD chap: Loaned my daughter £100k for a £300k purchase of house in Oxford.

Host: Wow, thats quite a large sum of money, not everyone will be able to afford that. Was that savings?

BOMAD chap: Nope, we remortgaged our home to release the cash, we'll be paying that back well into retirement.

I had my head in my hands at this point, why can nobody see that the only potential winner from this scenario is the banks?

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There isn't an unlimited amount of cash held by boomer parents so sooner or later that will dry up as a source of funding for FTBs, that was always obvious.  The 'next generation' of parents of course generally won't have any significant wealth to their name to pass on.

HPI really is an illusion of wealth - the only people who truly profit from it are bankers and developers.  The punters who think that they have somehow made themselves rich through their own brilliance will inevitably find that the bankers claw it back by hook or by crook..

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2 minutes ago, Sour Mash said:

There isn't an unlimited amount of cash held by boomer parents so sooner or later that will dry up as a source of funding for FTBs, that was always obvious.  The 'next generation' of parents of course generally won't have any significant wealth to their name to pass on.

HPI really is an illusion of wealth - the only people who truly profit from it are bankers and developers.  The punters who think that they have somehow made themselves rich through their own brilliance will inevitably find that the bankers claw it back by hook or by crook..

I will add the average joe who sold at peak to retire in France, Spain ...

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14 minutes ago, Sour Mash said:

There isn't an unlimited amount of cash held by boomer parents so sooner or later that will dry up as a source of funding for FTBs, that was always obvious.  The 'next generation' of parents of course generally won't have any significant wealth to their name to pass on.

HPI really is an illusion of wealth - the only people who truly profit from it are bankers and developers.  The punters who think that they have somehow made themselves rich through their own brilliance will inevitably find that the bankers claw it back by hook or by crook..

The game is rigged.

Best way to win is not to play.

Difficult though when it's f**king raining.

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4 minutes ago, TheCountOfNowhere said:

The game is rigged.

Best way to win is not to play.

Difficult though when it's f**king raining.

Not sure - the rules are fairly well established - it is rigged for sure -  just don't believe the money tree grows to the sky. Some people win in any casino 

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2 hours ago, Smiley George said:

BBC Radio 5 had a piece on this this morning, went something like this:

Host: So you're a BOMAD investor, how much did you loan?

BOMAD chap: Loaned my daughter £100k for a £300k purchase of house in Oxford.

Host: Wow, thats quite a large sum of money, not everyone will be able to afford that. Was that savings?

BOMAD chap: Nope, we remortgaged our home to release the cash, we'll be paying that back well into retirement.

I had my head in my hands at this point, why can nobody see that the only potential winner from this scenario is the banks?

Financiers are laughing at us...extracting economic rent from us on a multi-generational level...a death grip of debt.

Don't worry George - there are others who see what you see. You are not alone.

Sad thing is we live under a system, predicated on cheap credit and usurious lending,  that rewards the reckless gambler, the person whom you look at and think "You did WHAT..?".

Modern UK - rationality, good sense, moderation, critical reasoning, forbearance, patience definitely NOT wanted here. Only 'go-getters' and 'risk takers'.

Sign of a degenerate society? One of them, for sure.

 

Edited by zilly

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I think its nothing to do with available cash, its just that all the stupid ones are up to their eyeballs in debt and the rest are saying  nah I'm not bothering thanks.

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1 hour ago, Gigantic Purple Slug said:

How does it work if it's a loan from the bank of grandma and grandad and they end up going into care ?

Does the loan count as part of your assets ?

If it's documented then yes. However most banks and building societies will refuse to accept a loan from parents as a deposit so many 'pretend' they have made a "gift" and fill out paperwork for the bank stating that it is a gift without reservation. See this on the MSE mortgage forums literally every day.

Sometimes it goes wrong...parents need the cash back and kids can't find it, young couple split up and the husband whose parents contributed a gift can't evict the wife because there are kids in the house (court won't kick her out while the kids are under 18), parents can't pay own extended mortgage after losing a job in their 50s, parents can't survive in retirement still paying a mortgage and want the cash back, or even brother and sister fall out after parents die because ones inheritance was 'gifted' as the others deposit and they can't get it back etc etc etc

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3 hours ago, Sour Mash said:

There isn't an unlimited amount of cash held by boomer parents so sooner or later that will dry up as a source of funding for FTBs, that was always obvious.  The 'next generation' of parents of course generally won't have any significant wealth to their name to pass on.

HPI really is an illusion of wealth - the only people who truly profit from it are bankers and developers.  The punters who think that they have somehow made themselves rich through their own brilliance will inevitably find that the bankers claw it back by hook or by crook..

BOMAD reinvesting in a ponzi scheme when they could be cashed out free and clear.

Stupid squared.

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2 hours ago, regprentice said:

Sometimes it goes wrong...parents need the cash back and kids can't find it, young couple split up and the husband whose parents contributed a gift can't evict the wife because there are kids in the house (court won't kick her out while the kids are under 18), parents can't pay own extended mortgage after losing a job in their 50s, parents can't survive in retirement still paying a mortgage and want the cash back, or even brother and sister fall out after parents die because ones inheritance was 'gifted' as the others deposit and they can't get it back etc etc etc

The parents doing BoMaD as a loan to their children are so dumb, bonus points when they've only managed to get hold of the cash by remortgaging their own home. There are good reasons why real banks weren't willing to lend the money i.e. they actually bothered to work out the probability of the children experiencing unemployment, divorce etc instead of just closing their eyes and hoping they would experience not a single major financial setback over the next 30 years of adult life.

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6 hours ago, Gigantic Purple Slug said:

How does it work if it's a loan from the bank of grandma and grandad and they end up going into care ?

Does the loan count as part of your assets ?

It would likely to be viewed as deprevation of assets if the money was gifted/loaned within 6 months of them needing care. Outside of that time frame less likely though they can go back years if they think something is up

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21 hours ago, zugzwang said:

BOMAD reinvesting in a ponzi scheme when they could be cashed out free and clear.

Stupid squared.

 

The property casino has a way of ensuring most never leave with their gains intact ..... Oooh, my house has gone up by x thousand pounds ... I'll just sell it and move up the ladder with my gains (next house will have gone up by even more so you nett lose).

 

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It’s a lovely cliche ‘bank of mum and dad’

Saves people talking about a return to the days when your wealth was determined at birth.

It’s amazing to me how readily we accepted this profundly unmeritocratic development, on the basis of a marketing slogan.

Tony Blair proclaimed the death of the class system, since we are ‘all middle class now’.  Little did we realise how determined he was to reinvent it.

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23 minutes ago, BuyToLeech said:

It’s a lovely cliche ‘bank of mum and dad’

Saves people talking about a return to the days when your wealth was determined at birth.

It’s amazing to me how readily we accepted this profundly unmeritocratic development, on the basis of a marketing slogan.

Tony Blair proclaimed the death of the class system, since we are ‘all middle class now’.  Little did we realise how determined he was to reinvent it.

 

Also shocking to see how quickly your access to third level education has increasingly become determined by family wealth rather than academic merit.  Of course, you can always roll the dice and take out a sizeable, interest-bearing loan.

People think it's great.  They also think it's great to have access to the best secondary schools determined by ability to purchase an even more overpriced than normal house in the catchment area of a good one rather than on academic merit too.

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On 29/05/2018 at 17:29, leonardratso said:

i wonder if francesca has a brother called mike?

has anyone seen mike?

Last time I saw Mike he was with Hugh Jampton

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Unlike "real banks" BOFMAD  will feel pain if the housing market goes south and relationships will be tested between parents and their children. In the real world banks should be that  protective and worried of their money, but their fear factor is probably around 2 out of 10 in their case.

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  • 301 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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