An article from the chief executive of the Building Societies Association, outlines the BSA’s new report into intergenerational lending and how the industry must find new ways to help younger people onto the property ladder.

The report suggests that in order to understand generational differences, we must look at how the customer demographics play a big part in this.

These demographics have been defined as follows:

• ‘Baby boomers’, those born between 1946 to 1964
• ‘Generation X’, 1965 – 1980
• ‘Generation Y/Millennials’, 1981 – 2000
• ‘Generation Z’ 2001 – 2018

The office for National Statistics (ONS) has been running a series of reports on the latest generation, ‘Generation Z’, and the barriers they are facing. The reports showcase their attitudes to alcohol, smoking and TV (not as interested as previous generations) but also what salaries they believe they will be able to enjoy. Expectations are relatively high, with those surveyed hoping to be earning £35k by age 30, if they get a degree and 25k without a degree. This compares to government survey data, showing an average salary of a 30 year old as being £23,700.

It is apparent, no matter when a person is born, there is a fundamental ambition to live in a home that you own. However, the reality of the housing market will be another disappointment for many. Recent research from the Institute of Fiscal Studies (IFS), shows that in 2017, only 35% of 25 to 34 year olds were homeowners, down from 55% in 1997. Last year, the BSA published a report on the changing patterns of home ownership for the elderly, with many borrowers purchasing homes later in life. It also painted a worrying picture for young people struggling to get onto the housing ladder.

This is where we talk about the ‘Bank of Mum and Dad’ or ‘BOMAD’. A report published by the BSA, gave an independent insight into the issue of intergenerational inequality. The report found that 70% of the public see the difficulties young people have in buying a home of their own, as one of the biggest issues the country faces. More than half (59%) of aspiring first-time buyers expect BOMAD to support them onto the housing ladder.

What does this mean for the market?

Product innovation in this market from building societies is already starting to increase the options beyond straight gifting. For example, 59% of building societies will accept a deposit from family members as security, 33% will accept a charge over the property of family members to ease affordability barriers and 10% offer family offset mortgages. Reports also make the case that now may be the time to revisit 100% LTV mortgages, especially if new ways of assessing a customers spending patterns via open banking can feed into more accurate underwriting.

How SPF can help you…

Here at SPF, mortgages are our speciality. In the last 20 years, we have helped thousands of Guernsey residents finance their homes.

Our ‘countdown to Mortgage’ service is designed to equip first-time buyers with the advice they need to save for a deposit and get mortgage ready.

Our advisers can tell within 10 minutes if a client will qualify in principle for a mortgage and identify the best lender for their personal circumstances. All we require is the basic information, such as income, assets and liabilities. From this, we should be able to advise on the best lender for you and the amount of money you can borrow.

We understand that every client is different and we offer assistance, every step of the way.