Opinion with Jane Wenham-Jones: What’s wrong with the Bank of Mum and Dad?

Housing

I know it might seem odd to wax lyrical about a financial institution but I’ve always been fond of the Nationwide. The staff are generally lovely, you can get a human being on the phone without longing to cut your throat, you don’t need a degree in computer science to use the website and the simplicity of the banking app is a veritable joy.

Thumbs up all round, in fact. Until this week, when the Nationwide took the inexplicable and short-sighted step of clamping down on “the bank of mum and dad” and coming over all Big Brother about where first-time buyers’ deposits come from.

The largest building society in the world, and one of the UK’s biggest mortgage lenders, has declared that to get a home loan with a 10% deposit, the borrower must prove that they came up with 75% of that amount themselves.

Why?

It’s extremely hard to save when you are young and low-paid and nigh-on impossible to get on the housing ladder.

I bought my first house when I was 21. It was a run-down, two-bedroom terrace in Ramsgate and cost £16,000. I was able to buy it because I was given 100% mortgage by the Halifax, my father lent me (and I mean lent)  the solicitor’s fees and my employer stumped up the deposit until the borrowing came through. I was teaching EFL at the time, and the students from other European countries were agog.

If my son, in the second half of his twenties, was to buy that house today it would cost upwards of £230K.

Even if he bought it without heating or a damp-proof course, and with a dodgy roof, as I did, it’s still going to be more than he could afford.  The cheapest terrace on sale in Ramsgate as I type, is £155k. I borrowed three times my income. To do the same he would need at least 15 grand in cash, and would need to earn more than £50k a year. In Thanet? Are we having a larf?

Old people (my husband) are fond of recalling how they scrimped and sacrificed to get a house and had second-hand furniture and no washing machine, but even that is not enough these days.

It wasn’t enough for me.  I was really hard-up in my early twenties. The house, the bills and my clapped-out Mini took all my earnings and I survived on a constant overdraft and straining credit cards. I rarely had new clothes, never had new furniture (luckily I had a boyfriend with a predilection for scavenging in skips), and on the couple of occasions I went abroad it was on a shoe-string. (I still shudder to recall the 28-hour coach trip back from Spain and the “hostel” in Amsterdam.)

But because of that mortgage deal, I had property. Which went up and up in value, so eventually I could have a bigger house. And so on.

I’m not poor now because I am approaching ancient and I married someone who was much better at saving than I was. And who fed me while I wrote books and tried my hand at various entrepreneurial endeavours – including acquiring more property.

Otherwise, I wouldn’t have a bean to my name.

It is harsh and unfair to penalise first-time buyers for not being able to stump up twenty or thirty thousand pounds at the drop of a hat. It doesn’t mean they are feckless or irresponsible. It means they don’t earn enough. If Mum and Dad can help, why shouldn’t they? It’s tough out there and that’s what parents do.

Lenders should be making it easier for young people to get somewhere decent to live –  either through long-term rental, owning or part-owning –  by providing generous mortgages, funding Housing Association projects or being a bit less stingy on their terms for Buy-to-Let.

So come on Nationwide. You were doing so well and I loved you. You’ve got the whole mindless music, press three for a nervous breakdown,  and You’re- now-27th-in-the-queue business licked. Now give the kids a break!

THIS WEEKEND will mark 46 years since President Nixon resigned. He announced his imminent departure on August 8th 1974, saying it had become evident that he no longer had a strong enough political base in Congress to continue.

“As President,” he concluded, “I must put the interest of America first.”

He went the next day and the new President was sworn in.

Figures released today show  that (finally) 54.75% of Americans disapprove of Trump.

We can but dream…

www.janewenham-jones.com

8 Comments

  1. We brought our first house in Ramsgate in 1973 for £7,000. Our mortgage was from the old Ramsgate Borough Council.
    [ NOT the terrible Town council we have today who give taxpayers money away to their friends]
    We used to be customers of the Hastings and THANET building society ( that was taken over by nationwide) they refused to give us a mortgage on our incomes. Although we are still with Nationwide they have NEVER been of any help to us. Yes the staff are helpful but Nationwide themselves aren’t helpful at all. An example of this was we wanted to give our 3 children £25,000 each to help them put down a deposit down on their first house. Nationwide were no help at all, they were very slow to reply and they questioned the value of our home and put as many obstacles in our way as the could. In the end we took out Equitiy release on our property we were given £100,000 within 4 weeks including house survey and all legal cost given free. When we are no longer here our children will not inherit much from our property but we have the peace of mind knowing they all have their own homes now with no thanks to Nationwide.

    • What’s wrong with renting? What’s neede is greater security for tenants and a lot more social housing. The right to buy has been very damaging. Council housing should never have been sold off.

  2. Hmmm . . . plenty of adverse reporting for the Nationwide. In the interest of balanced reporting, has the Nationwide been asked for a response ?

  3. As an alternative to buying, there is always renting.
    I don’t understand this obsession with the “housing ladder”.
    Every thing was ok until Thatcher brought in the Right to Buy.

  4. I fully agree Thacther’s reckless policy’s of selling off council housing was unforgivable she ruined so many lives and made so many homeless we are still seeing the effect today. Councils lost billions of pounds in assets and rental income.
    As for renting, if you rent you have to always pay someone else to live in the property if you buy the property once it’s paid for it’s yours no rent no mortgage. We could never live with a landlord holding us to ransom of putting the rent up as and when they want to and telling us what we can and cannot do. No thank you.

    • I have lived in rented property for most of my life – it was mostly in housing co-ops. That, in my opinion, is the best kind of social housing, as every adult is a tenant-member and has a vote on significant matters such as rent increases.

      The system we have, where there seems to be little security of tenure, needs reform.

  5. I was lucky enough to get on the ‘housing ladder’ (I don’t like the term either) in my early thirties, but that was only after saving for a deposit for 10 years. If my parents had been in a position to help then they would have, but they just didn’t have any spare money at that point. They bailed me out with lots of moral support instead!

  6. This obsession with actually owning your own home is peculiar to the UK and to the USA. Many perfectly well-off people in the rest of Europe rent their homes. In return the owners are obliged to keep the places in good condition and well-maintained. The same cannot be said for private -rented houses in this country. They are often obvious to identify because of their sorry state. (Not always true, admittedly. Around us there are three rented houses and two are in good nick. Because the tenants intend to stay long term and they stick to the tenancy agreements that force them to virtually do the landlord’s maintenance tasks for him!)

    In the end , we ALL lose out. The 2007/2008 economic crash happened because wages in the USA had stagnated at such a low level for so long, and the lack of decent rented accommodation forced millions of struggling Americans to take out mortgages hoping their wages would improve.
    They didn’t improve and soon there were millions of mortgages that the Banks held that they knew would never get paid. So they flogged off masses of the duff mortgages to other Banks(including British ones) as a form of ” sure-fire investment”.
    Eventually, the con could not be hidden and the whole western Banking system was revealed to be built on useless, unpaid mortgages that would never make any return.
    Our banks had no money!!!
    In the end, the taxpayer had to step in and bail out the banks.
    So why the Nationwide feels it has to get tough with the taxpayers , and feels no shame in doing so, I don’t understand. Except, of course, the bankers have been let off scot free and the rest of us are paying with our run-down services and with our lives as our services are revealed to have been underfunded for ten years and now unable to really cope with Covid19.

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