Aussie parents cough up $65.3 billion to get young buyers into the property market
Recent Mozo research has revealed that first home-buyers are increasingly turning to the Bank of Mum and Dad to secure funding for their property purchase, making Aussie parents the fifth biggest lender in the country, behind the big four banks.
The study found that 29% of families offer financial assistance to children looking to get on the property ladder. That’s 1.02 million families around the country, handing out loans to the tune of $64,206 each or a grand total of $65.3 billion.
In comparison, the Commonwealth Bank is the largest lender in Australia, with $416 billion worth of loans to its name, and ING ranked just below the Bank of Mum and Dad, with $42 billion of total lending on its books.
Mozo Director Kirsty Lamont said the “Bank of Mum and Dad” is now playing a huge part in helping young Aussies buy their first home.
“For many first home buyers, house prices around Australia can be absolutely daunting. It can take years to scrimp and save for a home deposit, all the while house prices continue to skyrocket, becoming increasingly inaccessible,” she said.
“The Bank of Mum and Dad is proof of family generosity but also points to a broken property market for younger generations.”
RELATED: Read the full Bank of Mum and Dad report
Parental assistance mainly came in two forms - 43% of parents allowed their children to live at home rent free while saving for a property purchase, and 41% opted to contribute money towards the deposit.
It’s not surprising that making monetary contributions toward a deposit was one of the most popular methods of helping out, given that saving a deposit is considered one of the biggest hurdles for property hopefuls these days.
The cost of contributing to the deposit averaged $42,343 for most families, while allowing children to live at home rent free was a more budget friendly solution, costing parents an average of $25,441.
And budgetary concerns may be on parents’ minds, considering 66% are dipping into their own savings to assist their children in buying property and 26% are cutting back expenses in order to find the funds.
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But while parents may have to tighten the belt, the payoff for their kids can be huge if getting the help allows them to build up a 20% deposit for their house. This will not only mean they can avoid paying Lender’s Mortgage Insurance on top of their loan, but may also allow them to snag the best home loan rate - which are sometimes only offered to borrowers with lower LVRs.
Got your deposit saved and ready to head to auction? Make sure you’ve got a competitive home loan in your back pocket first. Head over to our home loan comparison table to find your perfect fit.