There have been calls to help first time buyers for years.
Ever since prices began to increase again a decade or so ago, pundits have urged Government, property developers and mortgage lenders to provide short cuts to home ownership for those wishing to set foot on the first rung of the property ladder. Even this week, new Housing Minister Grant Shapps held a summit on this very subject.
Year after year it’s been said that prices have been running away with first-time buyer dreams, and that the housing ladder has been pulled away from underneath first-time hopefuls. Metaphors like this have been mangled at us time and time again with the slow but steady resurrection of the housing market.
And yet, even though we’re being bombarded with mangled housing metaphors, somehow first-time buyers are buying. The flood may have reduced to a trickle, but that trickle is still enough to keep that metaphorical housing ladder upright enough to prevent it from toppling over completely.
Castle or otherwise, an Englishman is famous for wanting a home of his own. So somehow, by hook or by crook, we English will get our homes, whether they’re castles or cottages. What we do to them, once we’ve become addicted to those DIY TV shows is another matter and one we’re not going to go into here.
But how? A virgin London home buyer wishing to absorb himself or herself into the cosy arms of a mortgage lender these days must, on paper, earn over 90,000 per annum, in order to qualify for a loan that will just about buy a quite unremarkable crash pad in Town. But the reality is that in the capital and elsewhere budding property owners are being bailed out by none other than the biggest, cheapest ‘bank’ in the world. The Parental Co-operative….. The Bank of Mum and Dad.
It’s a bank that spends nothing on fancy HQ buildings, nada on full-time or temporary staff, zilch on advertising and very, very little on its IT infrastructure. But it can wipe the floor with any high street bank anywhere on earth. According to the Council of Mortgage lenders, five years ago The Bank Of Mum And Dad had a customer base that included 38% of first time buyers under the age of thirty. Suck on that, Goldman Sachs. But that was then. Now, the Council tells us, that figure has gone up to 84%. Learn from that, Citibank. The Alliance and Leicester calculates that the average loan is 21,300. But even GS and CB’s most preferred clientele don’t get the kind of preferential rates BOMAD customers find themselves being offered. Interest rates? What interest rates? Come to think of it, what interest? And as for a repayment schedule, that can be quite often be deferred until the property in question has been sold – if, in fact, there’s any kind of repayment schedule at all.
There are even ‘Parent Mortgages’ whereby Mum and Dad can stand as guarantor for their property minded kids. The Bath Building Society now offers a home loan that secures a higher loan to value mortgage on the equity in the borrower’s parents’ property.
With increasingly ingenious ways of getting buyers onto the property ladder, we shouldn’t be too surprised that no matter how many housing metaphors get mangled and thrown our way by metaphor manglers who really should know better, the housing ladder remains resiliently upright and won’t go down the proverbial drain.
So let’s hear it for the Bank of Mum and Dad – an establishment that – unlike far too many lenders these days – shows no sign of reining in its lending power.
But let’s hope that the management doesn’t decide to call in its loans for a long, long time.
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