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Should young home buyers withdraw from the bank of mum and dad?

Money and home

Is the best way for parents to help their children onto the housing ladder not to help at all? Lynda Clark of First Time Buyer magazine explores the options for first-time buyers and their parents.

Getting on the housing ladder has never been an easy task. Even when I bought my first home some years ago it took years of saving to get enough for a deposit. However, on balance, I do think that hopeful young home buyers today probably have the biggest mountain to climb.

With our own impending pension pots looking a little less fruitful, and many of our generation now expecting to work into our 70’s, it does seem a little daunting that we as parents are also relied upon to give the generation behind us a financial boost onto the housing ladder.

The reality is that home buying today is a completely different place to when we were seeking out our first homes. Back then house prices weren’t as high, mortgages were easier to secure and lower deposit requirements ensured a more affordable monthly repayment.

Tips for first-time buyers

As a devoted mother to three adult sons (two of whom have made it onto the housing ladder) and as editor of First Time Buyer Magazine, I feel it my duty to share some ways that you may not have considered to help your children buy their first home.

While the market may be a tougher one and involve much more financial scrutiny, as well as dealing with house prices increasing at a faster rate than incomes, today there are actually many new innovative ways available that will reduce the upfront cost of buying a property.

  • One you may have heard about is Help to Buy, which is one of the most cost efficient ways to buy a new home with less upfront cost. Basically it means the government provides a loan, so you won’t have to.
  • Alongside this is the forthcoming Help to Buy Isa, a savings account for first-time buyers that could see up to £3,000 put in by the government.
  • Shared ownership is a great way to buy a portion of a property, without having to stump up the entire cost straight away.

Children moving back home

Of course, allowing your child to move back home is a more cost effective way to allow them to save for an all-important deposit. I did this myself and while I very much enjoyed this extra time with my grown up boys, it was also very nice to see them eventually find their own place – encouraging them to take responsibility for their own upkeep as well as giving my washing machine a well-deserved rest.

So there are many ways to help your children onto the housing ladder, without necessarily breaking your own bank. There’s a huge pressure on parents to support their grown up children onto the housing ladder, but a bit of guidance, support and perhaps even a little more time under your feet may be all that it takes.

Have you ever had to help your child onto the property ladder? Or are you a first-time buyer looking for help from your parents?

This is a guest contribution by Lynda Clark, editor of the First Time Buyer magazine, which is running the First Time Buyer Home Show on 10 October 2015. All opinions are Lynda’s own, not necessarily those of Which?

Comments
Member

Never mentioned in any discussion on the difficulties of getting on the housing ladder is the failure of recent governments to enable the colleges and universities to provide enough accommodation on campus or in separate buildings to house the higher intakes they attract. The student population then takes out three or fours years’ worth of housing supply in the adjacent suburbs that could have made small houses available to first-time buyers and held market prices in check. Norwich [with three universities and two large colleges] has roughly 10,000 students living independently off-campus which probably equates to 3,000 homes that could be suitable for first-timers.

Given that many people nowadays are not reaching the queue for a new home until they are in their mid-twenties, it is not surprising that in terms of size and standard of accommodation they want to start where the previous generation left off so they look for three bedrooms and off-road parking plus all mod cons indoors. Reality will temper these aspirations.

More could also be done to relocate jobs away from the metropolis and major conurbations so that people are not struggling to find a home in an over-heated property market. It’s not good for society that people are travelling for over two hours a day to and from work and then only getting enough to afford a shoe box.

Member

Where I live most affordable first time buyers houses are purchased by by-to-let investors letting them out to young people who are unable to compete in today’s market and are forced into paying unregulated amounts to callous and unsympathetic landlords.

Member

Beryl, the thing is the rent they pay is more than the mortgage if they were to buy. The deposit is the obstacle. One solution is still shared ownership – at least it gets you on the ladder with a smaller deposit and you then have a stake in the property. Another is to go back to building council houses on land bought at sensible prices to allow building costs to be as low as possible. This is in the gift of the council when granting planning permissions. But these houses need to be on short term tenancies for people who cannot, at the time, afford market rents. As soon as they can the houses should be re-let to others in need.
In London (and elsewhere if it is a problem) we should make punitive charges on properties that are purchased speculatively but unoccupied.

Member

Malcolm the whole property market is in need of regulation. People are using their pension pots to buy houses topped up with a mortgage to
supplement their incomes due to the present and enduring low interest rates. Problems could occur when predicted interest rates increase in the near future when banks could experience similar problems as 6/7 years ago with pensioners unable to keep up mortgage repayments and tenants unwilling or unable to pay the inevitable increased rents as a result.

Not everyone is happy to buy with a shared ownership with interest rates set to rise.

Member

Beryl, I don’t know what is meant by regulating the housing market. Maybe we should get away from the concept that home ownership is the UK’s dream. We need somewhere to live but don’t need to own it – many European countries rent rather than buy. That still requires the core problem to be solved – enough homes in the right places. Regulation might be to require developers to be given planning permission only if they build a decent proportion of small homes in terraces, maisonettes or flats, that keep the costs down. Local authorities have the gift of granting planning permission and should only release land on that basis. The alternative is for the government to develop this sort of housing. One restriction should be that if these artificially-cheaper (as in on subsidised land) houses were resold, a proportion of the gain went back to develop more such houses.

Member

Local Authorities currently grant planning permission to developers on the condition they build a percentage of ‘affordable homes’. Developers are currently experiencing problems
selling the more expensive 4 bedroom properties as prospective buyers are reluctant to move
close to social housing with all the problems that come with them eg parking etc.

Private landlords can charge whatever rates they
choose and let their properties to anyone with the ability to pay. There is a need for councils to return to the old system of social housing so that
people who are incapable of respecting their neighbours right to a peaceful existence are
sufficiently regulated, but without complete
reform and regulation in the private sector, landlords will continue to exploit tenants and
certain tenants will continue to make their
neighbours lives miserable with their unacceptable behaviour and lifestyles.

I don’t envisage the UK resorting to the
European system of renting. Maybe they are better regulated there which would explain why
it works.

Member

I think the ‘affordable homes’ policy [or ‘homes for the community’ as housing developers euphemistically describe them on their site layout plans] has generally failed. Each local council has its own policy and requirement; fair enough, that reflects local needs presumably, but it takes no account of commercial viability. Some councils require 45% of developments to be in the form of affordable homes. We have looked at numerous new developments over the years, not necessarily with a view to buying but just to see what new housing is like these days [and it isn’t progress in my view].

Developers first try to argue down their obligations to build affordable homes because a block of ‘affordables’ [which usually have to be built first] make it harder to sell the rest of the development. They build them with a grudge to the meanest specification without a garage or car parking space within the curtilage of each property leaving just a car park with 11 spaces for every 10 houses. It is rare to see designs that don’t discriminate these properties from the rest of the development. If the purpose is to assist first time buyers it doesn’t work, because the developers cannot stop the properties being bought up by buy-to-let landlords who just see the properties as a cash machine and look after the properties to a minimal standard. In our area rents are not that high because there is a surfeit of lets on the market. The consequences are foreseeable.

In many parts of the country that were well provided with Council housing, some of it to a very high standard, much of the local authority housing has become owner-occupied [under the right to buy] while much of the owner-occupied housing has become private rented in the form of assured shorthold tenancies, with the occupiers on two months’ notice. Not a good recipe for social cohesion and civic values.

There is clearly a need for tenancies and other alternatives to complete owner-occupation but the proliferation of short tenancies and delinquent landlords is impeding the supply of sufficient decent housing to meet the country’s needs.

Member

I agree wholeheartedly with your comments John. I have reached a point where I have become very weary of playing custodian to the privately rented house next door where the landlord refuses to fulfill his legal obligation to maintain the exterior of the property and the tenants with their 4 unruly children continue with their noisy and raucous behaviour. Complaints have succeeded to improve the situation on a temporary basis but after a while the old ingrained patterns slowly return to the status quo because neither landlord nor tenant give a hoot about the welfare of their long suffering neighbours.

I have finally decided to put my house on the market and move back to a detached property where hopefully I will enjoy some semblance of peace and quiet in my advancing years.