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UK parents take risks to help kids buy property

Source: Agencies | May 6, 2014, Tuesday | Online Edition

UK parents take risks to help kids buy propertyFirst-time buyers in the UK are increasingly dependent on support from their parents, who in turn risk their own financial future to help their children get on the property ladder, CNBC television reported.

Some 63 percent of 20 to 45-year-olds who have bought a property received help from their parents, UK bank Halifax said on Monday. It found that six in ten young people now expect their parents to help them get onto the increasingly expensive UK property ladder, the report said.

As a result, some parents are putting their own financial security at risk. Around 38 percent of parents who helped their children buy a property are, as result, now concerned about their own financial future, Halifax found, according to the report.

While 27 percent of those who helped their children get onto the property ladder had to dip into their savings, and 10 percent gave their child an early inheritance.

The study comes as house prices in the UK continued to post strong gains in April, with prices outside of London rising more than at any other time in the last decade.

British house prices increased by 0.6 percent last month, according to residential property analysts Hometrack. But while London continued to post above-average growth of 0.8 percent, signs of resistance indicated that prices in the city could start to ease in coming months, Hometrack said.

On Monday, Lothar Mentel, chief investment officer at Tatton Investment Management, warned that Britain's property market was "too hot."

"We can see a real frenzy in the market. You hear of all these stories where people are not even putting in a bid...or people put in bids without even seeing the property. Those are all signs to me that things are a bit too hot," he told CNBC.

Given the continuing rise in house prices, Halifax's Mortgages Director Craig McKinlay said that parental support was a "fundamental first step" in buying a home.

"For parents whose children are looking to buy, and the those first time buyers now wanting to own, real consideration needs to be given to set realistic timescales and ways in which this can be achieved without either party being overstretched of facing longer term financial difficulty as a result," he said in a press release.

Halifax said there was a "marked shift in the sacrifices that the parents of generation rent made to get themselves on the property ladder compared to current homeowners aged 20-45."

The survey follows comments from Nigel Wilson, the chief executive of insurance group Legal & General, who said that the so-called baby boomers had "lived for free" as the gain in their house prices had outweighed their mortgage interest costs.

"For homeowners of my generation, housing has been free – capital gains have far exceeded interest payments. Meanwhile, throughout my adult life, renting has been economically unattractive," Wilson said in a report published Friday.

 

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