Innovative products to be created for would-be home owners
The Building Societies Association (BSA) have recently published a raft of recommendations as to how the mortgage industry can support the Bank of Mum and Dad in their endeavors to help first-time buyers onto the property ladder.
They have called for more innovative products to be created to enable parents and grandparents to loan or gift money to family members who are would-be home owners. The BSA also wants building societies to provide clearer communication to help explain all the options, and it wants regulatory and tax barriers to be broken down.
Helping younger homebuyers climb onto the housing ladder
The BSA’s report recognises the contributions of the Bank of Mum and Dad to date, highlighting the billions of pounds that have been gifted and lent to help younger homebuyers climb onto the housing ladder.
They also confirmed that 90% of all building societies expect this form of financing to play an increasing role in helping first-time buyers over the next five to ten years. Their priority now is to help create an environment whereby the financial well-being of the older generation is not put at jeopardy due to their generosity in helping younger family members achieve their housing objectives.
- 86% of people surveyed wanted to own their own home, but the financial challenges facing first-time buyers meant many thought they would never achieve this aspiration
- In 2017, there were 360,000 first-time buyers – but the minimum should be nearer 450,000. The ability to buy was increasingly concentrated on dual-earning households and those with higher incomes
- More than half of aspiring first-time buyers expected the Bank of Mum and Dad to support them onto the housing ladder
Support between generations remains a fundamental ambition
The report also highlighted how the Bank of Mum and Dad wasn’t just about family members handing over cash in the form of gifts and loans – many customers wanted support between generations through guarantees or using their property or savings as security. Indeed, it also identified equity release or downsizing from larger properties as ways to support the younger generation.
Robin Fieth, Chief Executive of the BSA said: ‘Home ownership remains a fundamental ambition for the majority of people…against the challenging backdrop of high prices, a woefully inadequate supply of homes and a growing intergenerational divide, new ideas and strong debate are essential. Family help – the so-called “Bank of Mum and Dad” – is great for those fortunate enough to have this option, but innovations in underwriting could help all potential first-time buyers.’
Mums and Dads – are you planning to lend money to your children?
It goes without saying that lending or gifting money to your loved ones shouldn’t endanger your own financial status. But if this is your plan, then it requires professional financial advice to assess all of your options. If you would like to discuss this subject with us, please contact us.