by Mark Johnston
The Bank of Mum and Dad Continues!
High house prices and the size of deposits have priced out more and more people, who are then forced into a rental market that is completely overheated.
It appears then that one of the oldest lending institutions is the Bank of Mum and Dad but its importance appears to be reaching unprecedented levels in recent times, especially when it comes to aiding home ownership especially since the financial crisis.
As the cost of living soars, more young adults are turning to their parents for financial help. Therefore meaning that the Bank O f Mum and Dad is the only one thriving in modern Britain.
Housing charity Shelter has placed the Bank of Mum and Dad’s role in the housing market in an even starker context by highlighting the £2 billion that UK parents collectively pay out every year to help their children on to the property ladder.
One of the biggest advantages of borrowing from parents is the fact that it can be an interest free loan. It will also mean no credit checks and previous credit history will not make a difference to lending.
Researchers have suggested though that parents are now putting their own financial security on the line to support their grown up children,.
Many parents are neglecting their pensions, raiding their savings and even remortgaging to give children a helping hand.
Parents are usually willing to financially help their children but certain issues have led the bank of mum of dad to pull down the shutters.
It seems that borrowed money has been the cause of many family arguments when repayments have become an issue.
There have been concerns raises about ‘the increasing strain on the Bank of Mum and Dad’.
The Council of Mortgage Lenders (CML) stated: “The fact that an increased reliance on the Bank of Mum and Dad over recent years has, until recently, gone hand in hand with sharply reduced numbers, illustrates that there are material limits to how much parental help can deliver, both in terms of how many parents are in a position where they can offer help and the depth of their pockets.”
Ben Thompson, managing director of the Legal & General Mortgage Club, warned that the Bank of Mum and Dad was “unsustainable” and could soon reach breaking point.
Other industry experts have also suggested that such a consistent level of ‘lending’ is not sustainable, especially when you consider the ageing population and the generally poor provision of retirement saving in this country.
Therefore, the fact is the government must do all they can to support the Bank of Mum and Dad, as it has become an important pillar in the current UK housing market and therefore is crucial to the economy.
It is also vital that the financial industry does its best to provide innovative and inclusive products that help reliable first time borrowers to realise their dreams of home ownership and lessen the load on well meaning parents
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