We all love our mums and dads.
As any psychologist would testify, a stable home life is the cornerstone to making us rounded, responsible individuals.
It helps to explain, in some way, why we saw the emergence of the trend known as the Bank of Mum and Dad after the credit crunch.
It was the practice of parents making the decision to support their children financially by using their life savings or releasing pension funds to help them to get onto the property ladder.
For those parents fortunate enough to have the resources, the decision-making was simple: they saw the value of providing the opportunity to give their children the means to create their own stable family unit.
It explains, therefore, why we are now seeing the emergence of the latest phenomenon – what we’d describe as the ‘New Bank of Mum and Dad’. Sadly, for some parents it carries a personal cost.
We are seeing increasing evidence of parents having to downsize or sell their family homes in order to provide the money their children need to put a deposit down on a house.
In 2015 around 80% of first time buyers under 30 (according to the Council of Mortgage Lenders) are seeking financial assistance from their parents.
Currently the average house price in the UK is around £250,000 with the average salary of a person living in the UK being around £26,000.
Even if you are looking to buy a house with a partner who is earning the same amount there is still about a £50,000 deposit required to get a mortgage. So stepping on to the property ladder for the first time can be a real struggle for many young people and that’s where the new Bank of Mum and Dad comes in.
This year we have dealt with many clients selling their homes for this reason. Ironically, in the majority of cases, these parents are selling the homes in which their children were raised to allow them to buy their own home and start their own family.
However, for some parents it does come at an emotional cost. As well as being the family home for many years – and so a stable and familiar base – the property is likely to have its own garden, and been subject to decades of careful upgrading, refurbishing or extending.
Downsizing inevitably means finding a smaller place, often without a garden. And if the capital gains are being handed over to children, it means that any hope of a large retirement nest egg will also have to be derailed.
It is a hard price to pay for any couple who may be looking to enjoy their retirement years.
But the pull of family love is obviously very strong. In fact, several of the properties we have sold in a new Bank of Mum and Dad process have led to the sellers buying a new place in the same locality that their children have bought. So what you are finding is that the one house sale is financing two family homes.
And the trend appears also to contribute greatly to the problem of UK’s ‘Last Time Buyer’ (LBT) issue. Recent research has shown the UK's LBT market consists of 5.3m under-occupied homes, resulting in some 7.7m spare bedrooms and a total of £820 billion of housing wealth, which is set to reach £1.2 trillion in 2020.
If we have the housing crisis that most industry and government experts say we have, it may be time for greater focus on the LTB market to help us unlock unused housing stock to provide the much-needed homes for new and young buyers.
But it has to properly worked through. Older people need to be able to move into properties that better fit their lifestyles and needs through measures, such as, tax reliefs against Stamp Duty, better options for equity release and improved housing choice and local infrastructure. Our older buyers – who will have made a major contribution to the UK’s economy though mortgage payments, Stamp Duty and supporting various businesses with home improvements work - need to be treated with respect.
It all points to the fact that the new Bank of Mum and Dad will be remaining open for a while yet.
By Scott Brown, Estate Agency Partner, Warners Solicitors and Estate Agents