No More Bank of Mum and Dad
Relying on the 'Bank of Mum and Dad' for major purchases has long been a popular way of avoiding high-interest loans and credit cards.
The latest statistics uncovered by Debt Lifeboat have revealed that only 71% of the over-55s are now prepared to lend money to friends and relatives.
The survey showed that almost a quarter of 16-34 year olds expect that they will have to 'tap up' their parents for a loan in 2008, most likely due to the increasing caution shown by high-street lenders. People in this age group are first time buyers and Phillip Allen, managing director of Debt Lifeboat has spotted a dangerous trend; "Younger people can feel very pressured to get a foot on the property ladder whether they can realistically afford it or not. Relying on parents for an interest-free loan may previously have been a solution, but fewer and fewer people can now afford to come to their children's financial aid". The reasons why are varied; "As a society we are living longer and many over-55s have elderly parents to support as well as their own children. Changes of circumstance such as divorce and remarriage can have a dramatic effect on finances meaning that many people nearing retirement still have large mortgages to pay off, and less disposable income to lend to loved ones". The result of this can be a descent into heavy debt, as young people take on large mortgages and resort to credit for basic everyday expenses, even food, in order to meet their repayments. For those considering making a first-time purchase, co-buying with a sibling is worth looking into. Many new-build developments now offer paid deposits with no stamp duty to make buying easier. For those already saddled with large mortgages and increasing credit card debt, downsizing your property could be the solution. The amount you save on your mortgage can be used to repay credit cards and loans each month.
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