MSE News: Parents' pensions could guarantee mortgages

Former_MSE_Darryl · 24 September 2012 at 11:13AM

"Young people could be able to use their parents' pension funds to secure mortgages, under plans unveiled by Nick Clegg ..."

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Parents' pensions could guarantee mortgages

iancummings · 24 September 2012 at 12:54PM

Does no-one in goverment realise that the parents don't have any spare money either? This is a "let them eat cake" approach.

mr_mince · 24 September 2012 at 1:01PM

Another ill thought out idea which will help a few people to get a mortgage but force more further out of the market.
The more daft ideas I see come out of No.10 the more I start to think The thick of it is actually a documentary.

brit1234 · 24 September 2012 at 1:20PM

Stupid idea which fails to address the main issue that house prices are overvalued. All this will do will attempt to prop up prices but at the same time risk peoples pensions future. With a looming pension crisis this is the last thing we need.

The reason banks require big deposits is to reduce the risk on them from overvalued property continuing to fall in price. The best thing for first time buyers is to stop the interference and let house prices fall back to affordable levels.

Pincher · 24 September 2012 at 1:30PM

Is Nick Clegg so young that he doesn't know about endowment mortgage/pension mortgage/ISA mortgages? In the days of 7% or even 13% return on equity in the 80s, these were used as guarantees for interest only mortgages. In those days, they put a brochure in front of you, with a 13% (per year) growth forecast, and promise you not only will your mortgage be paid, you'll have extra left over for a cruise round the world.

In a more fundamentalist country, their tongues would be cut off by now. Hmm, new profession, retrain out of work EPC certificate inspectors as tongue cutters. Booming industry: salesmen of all sorts need cutting, too.

If you walked into exactly the same bank that sold you a pension mortgage 20 years ago, and ask for a mortgage backed by the same pension plan, guess what will happen? What about this endowment policy you sold me, can't you lend me money based on that?

Sorry sir, we need a proper repayment vehicle, not a lemon you bought because we thought you were an idiot.

unhappy_shopper · 24 September 2012 at 1:34PM

IMHO, this is an absurd idea. Why do you want to play with your parents' retirement funds? In case the child defaults on payment, the parent will lose their lumpsum collateral. Yet another ill-thought-out venture. If the parents really want to help their children, they should give the money without any ties. Who is to prevent the parents from being coerced/blackmailed into putting their savings as collateral for their children's mortgages? I think there is no safeguard for the older generation when they really need the savings for their old age needs.

dunstonh · 24 September 2012 at 1:37PM

It seems to be an ill conceived idea. Those with large enough pensions and able to sustain themselves to a certain level of guaranteed income in retirement can already access their pension fund as a lump sum. Those that dont have that level will need their pension fund for themselves.

Pensions are pensions. the clue is in the name. They are not savings accounts.

Pee · 24 September 2012 at 1:47PM

My view is that only in very unusual circumstances will this be helpful for anyone. A parent may feel compelled to use their pension to guarantee a child's mortgage but if the child fails to pay the mortgage the parent may end up with an underfunded old age.

I think very few people have adequate pension provision, and those that do have probably considered deposits for houses for their children before now.

Reaper · 24 September 2012 at 3:22PM

An appalling idea. Nick Clegg doesn't seem to have grasped the concept of supply and demand. If you make mortgages easier to obtain you don't make houses easier to buy, the prices just go up. The problem is that debt has been so ludicrously easy to obtain in the past that prices have become unrealistic high. What is needed is a period of readjustment, not foolish artificial boosts to house prices.

Add to that the fact most people are under-pensioned and robbing their pension funds just means you are making a bad problem worse.

Mishomeister · 24 September 2012 at 8:25PM

As of being orphan I would strongly oppose this idea. This will push the prices up even further. It will also mean that first time buyers who have saved up hard will find it even harder to compete with those who have parents with high pension pot. It is those who have proven ability to save should be able to buy not the ones who spend all their own money demonstrating unavailability to save but have rich parents!!!

Debt_Free_Chick · 24 September 2012 at 8:35PM

Firstly, it can't be done without a fundamental change to the tax legislation around pensions. Registered (what used to be "approved") pension plans can not be assigned, therefore can't be offered as security.

Assuming Cleggy's announcement includes a tacit pledge to change that - it's still a bad idea.

DC pension pots - unpredictable. What if the ultimate pot suffers investment losses, so that the lump sum is less than the amount guaranteed?

What if the guarantor dies?

What if the mortgagee defaults and the property is sold for less than the outstanding mortgage? Ditto, even if the mortgagee doesn't default?

It's not as if we're a pensions-rich society - and it's very badly timed, given that auto-enrolment (into a pension scheme) starts in exactly one week and is meant to get folk to understand that pensions are an income in retirement.

MSE News: Parents' pensions could guarantee mortgages

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