Copy article

"Last year’s retirees are still financially supporting their family"

Journalist: Les Steed, AE3 Media / Mortgage Solutions

ended 13. April 2022

I'd like to get your thoughts on how the bank of mum and dad is playing an increasingly pivotal role in subsidising people's mortgages and deposits. Is it fair? Do first-time buyers have it tougher than previous generations or are they not putting the work in that previous generations put in? What should consumers do to close the gap? Is ‘generation rent’ being pushed out of the market? What more needs to be done to make it easier for FTB's to get a foot on the ladder?

4 responses from the Newspage community

Copy all

Copy

Editor
Rob Peters
Principal at Simple Fast Mortgage
Rises in house prices have long outstripped rises in earnings. And herein lies the main problem. Add to the mix that housing supply has long not met housing need, causing further price rises in a market dominated by 'supply & demand'. Then there's a little soupçon of Government intervention to bolster the housing market, here and there, via vast periods of low interest rates, and stamp duty holidays, just to add extra flavour. The resulting dish is less about first time buyers 'putting the work in' to build a deposit, as were the good old days, and possibly more about is home ownership as the norm for UK society, altogether becoming a thing of the past.
Copy

Stuart Powell
Managing Director at Advice Guru
One of the best kept secrets in Mortgages is that parents are able to release funds from their own property to gift to their children. These funds can be used to increase the deposit and can often mean their children get a lower interest rate. The gifted funds can either be a part of the inter-generational wealth transfer plans of the parents, or in some cases, the children pay the interest on the loan to prevent the loan increasing in size. This may also protect their future inheritance.
Copy

Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
The current crop of would be home owners do certainly have it harder than previous generations have, for a couple of key reasons; the growth in house prices has outpaced the rise in wages for years, so the average UK salary and the average UK house price have been moving further and further apart. In turn makes it harder to save up a deposit, as the required amount moves skyward like a rocket, but wages grow at a snails pace. The other issue modern house buyers struggle against is that people are dying at much older age; meaning less houses in the market and less inherited wealth coming their way whilst they are in their 20's and 30's compared to previous generations, so they would be having to save their entire deposit in most cases - that older generation gifting them cash now, which would most likely have come to them at a later date anyway, works well for all concerned. I'd certainly rather see my children enjoy any inheritance I may be able to give them, rather than them only get a financial injection after myself and my wife die.
Copy

Rhys Schofield
Brand Director at Peak Mortgages and Protection
Frankly the assertion that would be first-time buyers are either not working hard enough or should cut out coffee and the gym to get on the ladder is utter tosh. You have to ask yourself, how can an average first-time buyer cover ever increasing rental costs AND save for a deposit? The reality is that they can't and without either living at home to save for a deposit or parental help with the deposit generation rent is very often stuck. The various help to buy schemes only kind of help. They've certainly helped get a lot of first time buyers with a smaller deposit on the ladder, but then they've also boosted house prices because successive governments miss the fundamental point that we do not have enough housing stock and we are not building enough either.