Helping your offspring on to the housing ladder may be costly, but it’s a priceless gift, writes Hugh Reilly
ACCORDING to a recent study by the Halifax, almost two-thirds of people aged 20 to 45 who have bought a home since 2012 received financial help from their families. When I was an impoverished 22-year-old fiancé looking to purchase a bottom-end-of-the-market matrimonial dwelling, it never crossed my mind to solicit monetary assistance from my parents. For one thing, the vault of the bank of my mum and dad eerily resembled that of the Bank of Okabena, Minnesota, after Clyde Barrow and Bonnie Parker had insisted on making an unauthorised withdrawal.
On the odd occasion when pater had two halfpennies to rub together, he thought it prudent to speculate to accumulate; it would be fair to say, however, that his equine-based investments seldom paid a dividend. Despite my father’s history of financial mismanagement, it did not stop him handing out clichéd quasi-religious economic advice. “Never a borrower or a lender be,” he’d say, his sagacity somewhat undermined by his regular need to take out a Provident cheque to ensure his children enjoyed decadent luxuries such as food.
A few weeks before the impending wedding vows, an imperious bank manager listened to my plea for mortgage moolah. He winced on hearing I was an undergraduate student and that my wife-to-be would be the sole earner for at least one more semester. Tugging as best I could on my receding forelock – premature male-pattern baldness can be humiliating – he astounded me by asking if we intended to have children any time soon. I assured him that impregnating my intended wasn’t on this month’s to-do list, an utterance that immediately soothed his agitated mind. He sanctioned the necessary funding for me to buy an, erm, compact, one-bed flat. Put it this way – had Diogenes forsaken his barrel for my tenement apartment, he’d have found his new abode a tad claustrophobic.
If it was difficult back then to become part of the property-owning bourgeoisie, it’s well-nigh hopeless today. According to the Halifax report, 92 per cent of parents think it is “hard or impossible” for first-time buyers to get a mortgage. Just a decade ago, lenders were handing out mortgage agreements faster than zero-hour contract slaves dishing out fast-food flyers on the Royal Mile. No deposit? No problem! Mortgages of 110 per cent enabled even the poorest to turn a home-owning aspiration into a reality.
However, with the crisis came the living hell of negative equity, wage cuts and high unemployment. Banks bailed out at the taxpayers’ expense have been decidedly more picky as to who is a good risk. Consequently, an increasing number of young people have turned to their parents in time of financial need.
It’s easy to understand why today’s progeny prefer to ask their parents for cash. Youngsters do not wish to be interrogated by a jobsworth mortgage adviser who will ask impertinent questions regarding how any sum advanced would be repaid. Call it a cartel but, without exception, the high street lending industry expects to receive the original loan plus a degree of interest, whereas money from mum and dad is deemed to be a grant. Banks also have this annoying habit of only giving cash to those already holding a substantial amount of money in an account.
On the other hand, parents readily disburse their disposable income to their offspring, safe in the knowledge that this is the short goodbye to their funds: tossing coins into the Trevi Fountain offers a greater chance of a financial return. This truism is borne out by the survey revealing that 92 per cent of parents did not expect their children to pay the money back. This is a tad worrying when one considers that a third of those who had given financial help worried that their generosity would impact on their retirement plans – the dream of a stairlift lies in tatters.
One is forced to contemplate why parents are prepared to sacrifice themselves for the sake of their kids – it’s Abraham and Isaac in reverse with poor old Abe strapped to the altar of Mammon, watching in horror as first-time buyer Isaac raises his pen to sign up for a 25-year mortgage. In my view, guilt is often a factor. Like many of my generation, I benefited from booming house prices, a fact my grasping children are acutely aware of. It matters not a jot to them that my admitted gains on the property ladder have been somewhat reduced by recently sliding down a slippery snake. My pied-a-terre in Glasgow, bought in 2007 for £80,000, has slumped in value to around £50,000.
Along with thousands of other premature retirees, I was the recipient of a not insignificant lump sum when my employer cattle-prodded me into the night. While all four of my children have jobs, none of them earn more than £20,000, nor do they have a pension. When my eldest son flapped his wings and expressed a desire to leave the family nest, I was in the fortunate position of being able to help him put down a large deposit that would secure a lower mortgage rate. It felt good to be able to give him, not so much a leg-up, more a push on to his tip-toes.
I don’t want my kids hanging around like vultures waiting for the day when a dead-eyed solicitor will read aloud the size of the goody bag bequeathed to them. However, operating a living inheritance scheme does bring its own problems. Siblings of the receiver may resent one’s munificence and expect a similar donation when they set up home; knowing my children as I do, I fear that an earnest retelling of the parable of the Prodigal Son will singularly fail to impress.
Of course, chipping in to put a roof over the head of one’s seed can be considered an optional activity. In the autumn of their years, some cash-rich parents choose to embark on a hedonistic lifestyle, buying overseas boltholes and open-topped cars. These individuals have no desire to see their children become victims of a dependency culture, preferring that the cherubs make their own way in life.
For me, being able to use what little wealth I have to assist my children is priceless – and you can take that to the bank.