RICHARD DYSON: The house prices generation gap means the Bank of Gran and Grandad is good for £1trillion

By Richard Dyson

PUBLISHED: 16:09 EST, 8 June 2013 | UPDATED: 03:11 EST, 10 June 2013

The Bank of Mum and Dad is going bust, but the Bank of Gran and Grandad is good for nearly £1trillion. This, on the face of it, is what emerged from two sets of figures published last week.

The first report, from the Council of Mortgage Lenders, painted a grim picture of young homebuyers’ dependency on parental help to raise a deposit.

In 2006, before the financial crisis, two-thirds of first-time buyers managed their purchase without parental help, putting down an average of ten per cent.

Grandparents' help: The property alone owned by over-65s is worth £770billion, report says

Grandparents' help: The property alone owned by over-65s is worth £770billion, report says

Today the proportion of first-timers who don’t need to turn to the Bank of Mum and Dad has plunged to nearer one third, partly because banks require bigger deposits, typically 20 per cent of the property’s value. The number of these buyers has also crashed, from 400,000 in 2006 to less than 220,000 in 2012.

The Council’s report went on to suggest that parental support was now reaching its limits, as people in their 40s and 50s had their own financial needs – including paying off mortgages and building pensions.

 

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The second report, from specialist lender Key Retirement Solutions, was a brighter snapshot of rising affluence among another group: property-owning pensioners. Almost five million pensioners own their homes outright.

The property alone owned by over-65s is worth £770billion – up by more than £1billion since January, thanks to the house-price recovery.

In a week when Labour sparked controversy by suggesting winter fuel payments for wealthy pensioners should be scrapped, these figures will be seized on by many as another sign of Britain’s growing inter-generational financial divide.

Investors about to get a better deal on fund charges thanks to Hargreaves Lansdowne's weight

 
   

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A revolution is under way at the biggest investment broker Hargreaves Lansdown and its 470,000 customers will benefit. Most use Hargreaves to invest in funds run by household names such as Jupiter, Invesco or M&G.

Now, thanks to sweeping new rules, Hargreaves has written to these fund companies demanding they reduce their charges.

They have a few weeks to reply. Such is the influence of Hargreaves Lansdown, most recipients of the letters, which The Mail on Sunday has seen, will do as required.

Ultimately it should mean private investors pay less to invest and enjoy higher returns. The revolution has come about because the previous City watchdog, the Financial Services Authority, banned the payment of secret commissions between fund companies and brokers such as Hargreaves.

The MoS has been foremost in campaigning for this ban over many years and in the face of much resistance. The greatest opposition to our campaign came from Peter Hargreaves, the man who founded the broker firm that bears his name and who has made a fortune of more than £1billion through it.

A few years ago in one of several heated exchanges, he admitted to me that not only did his customers not know how much they were paying him, but many believed they were not paying at all. I found that shocking. It explained why there was scant competition: how could there be, if consumers had no idea what they paid?

It also explained why firms like his were so super-profitable. The situation has changed with the arrival of the new rules, and the firm insists it now discloses commissions. But several years ago, at the time of my dispute with Peter Hargreaves, the watchdog must have shared our view, because the slow process of forcing companies to disclose charges and commissions was set in motion.

The new rules are only just coming into effect. Peter Hargreaves’ implacable hostility to the regulations – he contested them every step of the way – now seems greedy as well as ill-judged. The status quo he bitterly sought to protect was not a system where private investors’ interests came first.

Instead, his interests were more closely aligned with the fund companies whose investments he promoted in return for cheques written behind closed doors.

Small investors, left in the dark, simply paid up, possibly believing they were getting an excellent deal. From now, they should do better.

The letter today on the desks of fund groups around the City and elsewhere, in which Hargreaves Lansdown (no longer managed by Peter Hargreaves) demands improved rates for its customers, is proof allegiances are shifting. Private investors’ interests are rightly to the fore.

Competition is already increasing. Costs should fall. At the very least, investors will soon know exactly how much they pay, whom they are paying and what they are paying for. Such basic transparency may not seem a lot for private investors to ask for, but obtaining it has been a significant battle, one MoS is proud to have helped win.

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there is a lot of factors which involve people having kids. and having kids that don't live with them and they have to pay their ex. partners very high Child Maintenance Allowances. This is something which goes hidden in society today as it is all too common but swept under the carpet. And before you say "that's their problem" think about the people that need to buy these houses we are the bearers.

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Gran and grandad are actually struggling to cope with lousy state pension ultra low interest rates ripping off their incomes by over 60% so quite where anyone gets the idea they can help the young is a mystery They started life with very little and went without in order to save and buy a house Its the idiots in power who think they can just remove a brick from the house walls and spend it

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davejones , London, United Kingdom, 11/6/2013 10:00 'Why do so many comment that UK is broke and that there's no money left. UK is still one of the richest countries in the world. It's total assets far exceed its total debts'...Really.. thats a new one on me, heck theres no debt, everyones rich, yippeh, lets celebrate.. Will you be saying the same thing when you are means tested on your bus pass, winter fuel allowance, disability allowance while paying more tax on your pension,and watching the youngsters struggle growing old with a milestone of debt round their necks while the old age pensioners see what little benefits including local social services and health care provsions being rapidly eroded away by over indebted local authorities trying to cut costs...welcome to reality my friend..Hilarious!

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Why do so many comment that UK is broke and that there's no money left. UK is still one of the richest countries in the world. It's total assets far exceed its total debts. The vast majority of people own their own houses, with many owning them outright. It's true that the workshy might not have money, but that's their problem. Buying a place to live is better than renting over the long-term. Suppose you leave home at 20 and live to be 75, that's 55 years. Pay mortgage for 25 years or pay rent (ever increasing) for 55 years. I can't see my people would even consider renting, apart from to cover short periods. But if you have the choice, then buying is the bets option.

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@peter , wirral, United Kingdom, 09/6/2013 16:56 - so what's your point? Were we 'greedy' because we bought houses and weren't profligate with our money when WE were 20-somethings? That is called 'sound financial planning'. It is hardly our fault that successive Governments have totally trashed the economy with years of ludicrous pressure-group-inspired 'policies'

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And after The Grandparents have have gone bust presumably we can rely on the Great-grandparents to dig us out of the debt hole. Come on Richard, you should run for Chancellor if you are so keen to dig your shovel into everybody's assets. There's not much left of the country when everyone has no money.

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I totally agree with grumpyoldgit, you do not live 'in' your investment, therefore house investments = safe as bricks and mortar!!

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Build council houses !!!!

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- phatwa, Kent, United Kingdom, 09/06/2013 20:53 Sorry. I think you misunderstood my point. By paying no more than an equivalent rent for 27 years , I no longer have to pay for a roof over my head. (Standard utilities accepted). I agree that there have been better returns on investments over the past 30 years, but where would I haves lived. You really can't be suggesting that renting for life is a better option, unless of course you have the spare money to invest as well. North of Birmingham houses are becoming far more affordable and people should buy them before BTL snap them up.

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grumpyoldgit,, sorry to interrupt your tedious gloating but if you looked into house prices over the past 30 years as opposed to 10 years, you'll see that they are NOT a good investment when taking into account inflation and when comparing to other long term investments. You win some, you lose some - in your case let's hope its not your house?

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