How I plan to help young people buy their homes
IN large parts of Bristol and South Gloucestershire, young people are struggling to get onto the first rung of the housing ladder. For understandable reasons, mortgage lenders are increasingly asking for much larger deposits.
But many young people simply can't get together the up-front capital needed for a deposit, as well as the other costs associated with buying a house.
As a result, people are often well into their thirties before they are able to set up home on their own.
Apart from the effect on individual families as this 'boomerang' generation ends up living at home with mum and dad for much longer, this is also bad news for the economy.
This week's delicious £5 5 O'CLOCKTAIL is a refreshing Tequila Sunrise. Available everyday from our Bar for only £5 between 5pm & 7pm.
Terms: £5 cocktail applies to the cocktail of the week.
Contact: 0117 2448281
Valid until: Monday, May 27 2013
Builders are not building because they don't think they will be able to sell the houses. This in turn means building workers are out of work instead of being employed building homes.
Where a young person or couple is lucky enough to have well-off parents then this problem can be overcome through the 'bank of mum and dad'. But the number of young people with wealthy parents is obviously very limited.
So I have been looking at whether we can do more to help parents who would like to support their adult children but who don't have a lot of cash to hand or money tied up in their house.
At present, when people draw a pension they very often take a quarter of the value of the fund as a tax-free lump sum. This money is not turned into a regular income through retirement but is simply drawn as cash. At this point, it could be used to help children with a deposit.
But what about young people whose parents are not quite old enough to draw a pension? My scheme would enable parents to commit to a mortgage lender now that "when they drew their pension lump sum" a part of it would go to top-up their children's deposit.
Assuming that mortgage lenders are happy to accept this security, this could unlock a house purchase.
In principle we could all benefit – young people get a home of their own, parents have been able to help their children and have their home back, and the wider economy benefits because houses are being built and people are being employed.
There are a lot of practical details that have still to be worked out, but the basic idea is simply to give people more choices about what they do with their own money, currently tied up in a pension. If people want to use it in this way, I'm keen to help them to do so, so that we all benefit.