Increase in support by BOMAD for FTBs

[Timm]

https://www.bbc.co.uk/news/business-66633680

Quote

A record number of people are getting help from family members to enable them to buy a house, a study suggests. Financial support from the "Bank of Family" is expected to help with 318,400 property purchases this year, according to Legal & General (L&G). Some 47% of all homes bought by those under the age of 55 will have been done so with the help of parents, grandparents or other relations.

Another reason why sentiment is key.

If sensible senior family members perceive the market to be falling, they may withhold or delay support for that very market.

 

Edited August 28, 2023 by Timm

[Armus]

BBC has an article with L&G saying 318k purchases this year will be with the help of family and 47% of purchases by under 55s will have help from family. https://www.bbc.co.uk/news/business-66633680

The BBC doesn't seem to question why someone "under 55" would need help to buy a house.

Is there a lot of MEWing still going on or are older people awash with money from having paid off small mortgages decades ago?

Edit - average amount contributed £25,600. 

Edited August 28, 2023 by Armus

[mynamehere]

But sentiment has worsened recently, and BOMAD has increased lending. 

I think this idea that your average buyer will put life plans on hold because prices are falling is fundementally flawed. People buy whenever they can afford it. 

The sentiment is that housing is more unaffordable than ever. So family require more help than ever

[captainb]

It's two separate questions.

Should family support be needed to purchase shelter. No.

Given that it is required "mum and dad" or granny and grandpa are doing it should come as no surprise. Nor is it new... Grandma passes away, there's an inheritance to distribute if material tends to end up in housing somewhere. Has been the case for decades.

 

Would also suggest the public are in no mood to stop it as shown by the bizarre support to increase the inheritance limit from 1m up.

 

 

Edited August 28, 2023 by captainb

[captainb]

13 minutes ago, mynamehere said:

But sentiment has worsened recently, and BOMAD has increased lending. 

I think this idea that your average buyer will put life plans on hold because prices are falling is fundementally flawed. People buy whenever they can afford it. 

The sentiment is that housing is more unaffordable than ever. So family require more help than ever

Renting being (typically) dire in this country supports that. And with rent rises getting worse/shifting balance back towards taking an expensive mortgage when rent just jumps up 10% (and yes typically it's just going to someone elses mortgage in the real world).

[Bruce Banner]

38 minutes ago, Timm said:

https://www.bbc.co.uk/news/business-66633680

Another reason why sentiment is key.

If sensible senior family members perceive the market to be falling, they may withhold or delay support for that very market.

 

18 minutes ago, mynamehere said:

But sentiment has worsened recently, and BOMAD has increased lending. 

I think this idea that your average buyer will put life plans on hold because prices are falling is fundementally flawed. People buy whenever they can afford it. 

The sentiment is that housing is more unaffordable than ever. So family require more help than ever

Or...

"We strongly advise against buying now but it's your decision and remember, any money we give/lend you now will ultimately be coming out of your inheritance."

[shlomo]

15 minutes ago, captainb said:

It's two separate questions.

Should family support be needed to purchase shelter. No.

Given that it is required "mum and dad" or granny and grandpa are doing it should come as no surprise. Nor is it new... Grandma passes away, there's an inheritance to distribute if material tends to end up in housing somewhere. Has been the case for decades.

 

Would also suggest the public are in no mood to stop it as shown by the bizarre support to increase the inheritance limit from 1m up.

 

 

Not everyone gets an inheritance and that has a big impact on quality of life and other things 

[captainb]

5 minutes ago, shlomo said:

Not everyone gets an inheritance and that has a big impact on quality of life and other things 

Yep. Real world.

 

Which is why I find public support to scrap inheritance tax odd.

With a limit at 1m it's already regressive.

[robmatic]

30 minutes ago, mynamehere said:

But sentiment has worsened recently, and BOMAD has increased lending. 

I think this idea that your average buyer will put life plans on hold because prices are falling is fundementally flawed. People buy whenever they can afford it. 

The sentiment is that housing is more unaffordable than ever. So family require more help than ever

I think it makes more sense for BOMAD to help out now in the current environment. A few years ago mortgages were cheap so there was less incentive for parents to utilise their cash other than for the deposit. Now, parents that have cash are getting poor returns in their savings account compared to what the offspring is having to fork out for a mortgage or for rent. 

[btd1981]

Just reinforces my bitter and twisted view that personal effort pales into insignificance compared to a person's background.

[ftb_fml]

1 hour ago, Timm said:

https://www.bbc.co.uk/news/business-66633680

Another reason why sentiment is key.

If sensible senior family members perceive the market to be falling, they may withhold or delay support for that very market.

 

 

44 minutes ago, mynamehere said:

But sentiment has worsened recently, and BOMAD has increased lending. 

I think this idea that your average buyer will put life plans on hold because prices are falling is fundementally flawed. People buy whenever they can afford it. 

The sentiment is that housing is more unaffordable than ever. So family require more help than ever

  

Indeed... if I every buy anywhere I'll be "lucky" enough to be part of this 47%.

Counter to Timm's suggestion however, my situation is the polar opposite - I'm holding out for falls / good value; while my mother can't fathom why I just don't jump on the first thing I can "afford" (tbh she's probably sick of having my miserable lump around the house).

I guess it's that typical boomer mentality; intelligent kid from working class background enjoyed massive social mobility due to both the prevailing conditions and her ability to capitalise on the opportunities afforded to her - state-funded meritocratic education, state pension, generous private pension.. everything came (relatively) easy; easy come, easy go.

While not loaded, she'll be very comfortable for the rest of her life and has little concern for value beyond the superficial; while I constantly worry about money, future security etc and consequently am as tight as a duck's arse.

 

It's all just another mechanism of unfair wealth transfer - kids from skint families get to rent / live hand-to-mouth while funding the lavish lifestyles of their boomer-BTL overlords and in turn contribute towards the deposit of said leeches' offspring to buy into property that their parents' greed has helped inflate away from the reach of mere mortals.

 

 

[shlomo]

32 minutes ago, robmatic said:

I think it makes more sense for BOMAD to help out now i

Some of us have always needed the help of BOMAD, regardless of the interest rate, to get a mortgage you need a deposit that is where you need help

[mynamehere]

47 minutes ago, robmatic said:

I think it makes more sense for BOMAD to help out now in the current environment. A few years ago mortgages were cheap so there was less incentive for parents to utilise their cash other than for the deposit. Now, parents that have cash are getting poor returns in their savings account compared to what the offspring is having to fork out for a mortgage or for rent. 

Savings rate have generally lagged mortgage rates by a couple of percent in average.  Not much different today in that sense. 
 

it’s not just cash. My neighbour was doing the equity release thing. Didn’t really sound to me like she could afford it. Sounded a bit sad she couldn’t spend it herself.  But kids come first !

[Timm]

45 minutes ago, ftb_fml said:

Indeed... if I every buy anywhere I'll be "lucky" enough to be part of this 47%.

Counter to Timm's suggestion however, my situation is the polar opposite - I'm holding out for falls / good value; while my mother can't fathom why I just don't jump on the first thing I can "afford" (tbh she's probably sick of having my miserable lump around the house).

I guess it's that typical boomer mentality; intelligent kid from working class background enjoyed massive social mobility due to both the prevailing conditions and her ability to capitalise on the opportunities afforded to her - state-funded meritocratic education, state pension, generous private pension.. everything came (relatively) easy; easy come, easy go.

While not loaded, she'll be very comfortable for the rest of her life and has little concern for value beyond the superficial; while I constantly worry about money, future security etc and consequently am as tight as a duck's arse.

 

It's all just another mechanism of unfair wealth transfer - kids from skint families get to rent / live hand-to-mouth while funding the lavish lifestyles of their boomer-BTL overlords and in turn contribute towards the deposit of said leeches' offspring to buy into property that their parents' greed has helped inflate away from the reach of mere mortals.

 

 

Perhaps she is afraid you will hold out too long and will miss the boat.

Are you viewing places, even though you are not ready to buy?

[ftb_fml]

13 minutes ago, Timm said:

Perhaps she is afraid you will hold out too long and will miss the boat.

Are you viewing places, even though you are not ready to buy?

Nah, she's just idealistic and entirely detached from the realities of the housing market / wider economy.

All I get is "your father and I found it hard, had to borrow off your grandad but we managed"; my response always being "how hard would you have found it if the house was twice what it was; when they bought in her mid-20s on the lowly salaries of a teacher and mechanic. Of course there's no answer to that.

I've viewed a few places earlier in the year; offered on one,got close but dug my heels in and it sold. I know what's out there and given how much agents take the piss I'm always likely to low-ball, so want to keep my powder dry until I see something I really like / represents decent value; don't want to get blackballed as a time-waster.

I want to move but in the grand scheme of things I'm in no rush as both my specific market and wider conditions seem to be slowly going in the right direction.

[Fromage Frais]

Sounds like its part of the process of lagging.

Just as all forms of credit are explored on the way up all forms are extended on the way down.

Whilst falls are happening many are still deluded and it will also take some time for home values on paper to reflect the prevailing market.  Ergo parents will be thinking hey my house is worth x hundred K I can help out.  You add a bit of covid savings in there and we still have the conditions for folks to help out.

The lag is a killer because people carry on like before until they cannot with only the disciplined breaking that behaviour in anticipation.

If you owned a campsite in a tourist location last year you would have had a wonderful time and your accounts would be wonderful allowing you to borrow.   This year you takings may well be down 20% plus and resulting impact on profits but at this exact time you still have the last few summers accounts and few campsites have been sold so you value you campsite at a high valuation and can borrow more money also.

in 12 months or Sooners time your accounts will show this wet summer and the above will be impacted.  Both the credit you can raise, the money you generate and the value of the business all reduce at the same time.  This will be the case for many sectors during the coming recession.

Its still very early days and every reduction in price sees people jumping in to catch a falling knife.

I dont know the extent of falls or how long it will take but.....

1300 a month is 15600

15600 is a 5% return on 312,000£

A house that rents for 1300 was 500 round here and is now nearer 450 and falling

 

[Warlord]

I find this incredible. Mine wouldn't do it 

47% is a huge figure 

 

Edited August 28, 2023 by Warlord

[winkie]

Do parents with older children still living at home or boomeranging back to family home think helping them out to buy own place will be doing them a big favour?........or doing themselves a favour?......thousands of London twenty and thirty years olds some a lot older than that, still living with parents, some saving hard to do it on their own one day, when the time and place is right?

[frederico]

Do we really think house prices will ever be anywhere near sensible values? For me that would mean at least a 50% drop .

Time either become a millionaire somehow or go on benefits, anything in between will  get you a lot of grief and poverty.

[shlomo]

14 minutes ago, Warlord said:

I find this incredible. Mine wouldn't do it 

47% is a huge figure 

 

Did they give a reason, or could they not help you?

[Society of fools]

3 hours ago, mynamehere said:

I think this idea that your average buyer will put life plans on hold because prices are falling is fundementally flawed. People buy whenever they can afford it. 

Would that sentiment still hold if prices dropped to 40% below where they are now in real terms within 18 to 24 months ? Surely people are not that stupid ? 

[mynamehere]

2 minutes ago, Society of fools said:

Would that sentiment still hold if prices dropped to 40% below where they are now in real terms within 18 to 24 months ? Surely people are not that stupid ? 

People want somewhere to live above all else. Most people are reluctant to gamble months, let alone years, on a speculation

[Society of fools]

2 hours ago, shlomo said:

Not everyone gets an inheritance and that has a big impact on quality of life and other things 

This is so true it is amazing it needs to be stated.
 

And I might add that it doesn’t simply apply to people from poor backgrounds. I know of several people whose parents were loaded, at least £1 million + in assets, but the kids got nothing in the Will. 
 

People are fickle, and the beauty of the common law system is that you can choose to disinherit your kids if you want.
 

The UK, the USA and Australia are not France, or Turkey, where forced heirship is the law. 

[cdd]

1 hour ago, Fromage Frais said:

Sounds like its part of the process of lagging.

Just as all forms of credit are explored on the way up all forms are extended on the way down.

Whilst falls are happening many are still deluded and it will also take some time for home values on paper to reflect the prevailing market.  Ergo parents will be thinking hey my house is worth x hundred K I can help out.  You add a bit of covid savings in there and we still have the conditions for folks to help out.

The lag is a killer because people carry on like before until they cannot with only the disciplined breaking that behaviour in anticipation.

If you owned a campsite in a tourist location last year you would have had a wonderful time and your accounts would be wonderful allowing you to borrow.   This year you takings may well be down 20% plus and resulting impact on profits but at this exact time you still have the last few summers accounts and few campsites have been sold so you value you campsite at a high valuation and can borrow more money also.

in 12 months or Sooners time your accounts will show this wet summer and the above will be impacted.  Both the credit you can raise, the money you generate and the value of the business all reduce at the same time.  This will be the case for many sectors during the coming recession.

Its still very early days and every reduction in price sees people jumping in to catch a falling knife.

I dont know the extent of falls or how long it will take but.....

1300 a month is 15600

15600 is a 5% return on 312,000£

A house that rents for 1300 was 500 round here and is now nearer 450 and falling

 

Compare that to close to 6% return on an ISA. 6% of 300K is 18k return a year.

Around here 300k would get you an average 3 bed terrace, which might rent for 1200 a month, so 14.4k return a year. There will also be many fees associated with buying the house, stamp duty especially, and this will easily wipe out your first year of rental income.

You'll have to pay tax on the rental income, so the figure could be quite a lot less than 14k. Even less again once you factor in letting agents fees and other landlord expenses.

On top of this you've got an asset which doesn't look likely to gain in value, and could even fall in value, possibly for years.

All weighed up, the ISA return of 18k or nearly 18k per year presently seems to be better than buying a house to let out.

[Bruce Banner]

1 hour ago, cdd said:

Compare that to close to 6% return on an ISA. 6% of 300K is 18k return a year.

Around here 300k would get you an average 3 bed terrace, which might rent for 1200 a month, so 14.4k return a year. There will also be many fees associated with buying the house, stamp duty especially, and this will easily wipe out your first year of rental income.

You'll have to pay tax on the rental income, so the figure could be quite a lot less than 14k. Even less again once you factor in letting agents fees and other landlord expenses.

On top of this you've got an asset which doesn't look likely to gain in value, and could even fall in value, possibly for years.

All weighed up, the ISA return of 18k or nearly 18k per year presently seems to be better than buying a house to let out.

Indeed it does, although it takes 15 years to get £300k into cash ISAs, or 7.5 for a couple, so it's always good to use your annual £20k if you can. We've been using our allowances even when ISA rates were on the deck for that reason.