First time buyers have always needed a little bit of help getting onto the property ladder.
For the past decade, since house prices started climbing once more, pundits have been urging property developers, mortgage lenders and even the government to provide ways and means for those trying to get onto the property ladder to get a foothold on the first rung. In fact, new Housing Minister Grant Shapps held a summit on this subject this past week.
In successive recent years it has been extolled that prices are running away with first time buyer dreams and that the ladder itself is being pulled away from under them. Such metaphors were regurgitated time and again as the market turned from lifelike to active; busy to over heated.
And yet, even despite all those mangled metaphors from pundits, experts and metaphor-manglers alike, people are still getting their feet firmly onto the bottom rung of the property ladder. And even though the flood of first time buyers has reduced to a mere trickle, their effect on the property market is still enough to keep that metaphorical housing ladder upright enough to stop it falling over completely.
An Englishman's home has always been his castle - or at least, an Englishman has always wanted a castle of his own. So it does seem that we, as a society, have the will to pull out all the stops to buy the bricks and mortar in which we can nest, invest and then, thanks to all those TV shows that make DIY look much more simple than it actually is ... get stressed.
But how are these first-time buyers doing it? Pick a virgin London homebuyer, any virgin London homebuyer. They'll have to be earning over 90,000 a year (at least on paper) to attract the attention of a mortgage lender, whether amorous or otherwise. And what will a loan based on that annual income buy? At the very most, something remarkably unremarkable in the way of a small flat in town. In reality, though, most first-time buyers aren't earning that much to start with, so where is the money coming from? Answer: possibly the biggest bank in the world, with definitely the best interest rates on the planet - the parental co-op that goes by the name of 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.
'Parent Mortgages' now exist, where property-minded youngsters can get their parents to stand as guarantors. And the Bath Building Society now offers a loan that uses the equity in the borrower's parents' property to secure a higher loan to value mortgage.
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.
Three cheers, then, for The Bank Of Mum And Dad, a lender that, unlike many others these days, is still keen to provide loans (even without references, yet).
But let's hope the management don't decide to call in its loans for a while yet.
For the past decade, since house prices started climbing once more, pundits have been urging property developers, mortgage lenders and even the government to provide ways and means for those trying to get onto the property ladder to get a foothold on the first rung. In fact, new Housing Minister Grant Shapps held a summit on this subject this past week.
In successive recent years it has been extolled that prices are running away with first time buyer dreams and that the ladder itself is being pulled away from under them. Such metaphors were regurgitated time and again as the market turned from lifelike to active; busy to over heated.
And yet, even despite all those mangled metaphors from pundits, experts and metaphor-manglers alike, people are still getting their feet firmly onto the bottom rung of the property ladder. And even though the flood of first time buyers has reduced to a mere trickle, their effect on the property market is still enough to keep that metaphorical housing ladder upright enough to stop it falling over completely.
An Englishman's home has always been his castle - or at least, an Englishman has always wanted a castle of his own. So it does seem that we, as a society, have the will to pull out all the stops to buy the bricks and mortar in which we can nest, invest and then, thanks to all those TV shows that make DIY look much more simple than it actually is ... get stressed.
But how are these first-time buyers doing it? Pick a virgin London homebuyer, any virgin London homebuyer. They'll have to be earning over 90,000 a year (at least on paper) to attract the attention of a mortgage lender, whether amorous or otherwise. And what will a loan based on that annual income buy? At the very most, something remarkably unremarkable in the way of a small flat in town. In reality, though, most first-time buyers aren't earning that much to start with, so where is the money coming from? Answer: possibly the biggest bank in the world, with definitely the best interest rates on the planet - the parental co-op that goes by the name of 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.
'Parent Mortgages' now exist, where property-minded youngsters can get their parents to stand as guarantors. And the Bath Building Society now offers a loan that uses the equity in the borrower's parents' property to secure a higher loan to value mortgage.
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.
Three cheers, then, for The Bank Of Mum And Dad, a lender that, unlike many others these days, is still keen to provide loans (even without references, yet).
But let's hope the management don't decide to call in its loans for a while yet.
About the Author:
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