Have you helped your child get on the ladder? How much did you sacrifice?
The lengths some parents will go to give their kids a leg up is, simply put, admirable. Especially when one in four parents face hardship to get their children on the ladder.
The Bank of Mum and Dad’s contribution has risen 41 per cent in the last two years, making it the fifth biggest lender in Australia.
The 1.2 million parents who make up BOMAD lent a total of $92 billion in property assistance in 2019 to children to help them onto the property ladder. Almost six in 10 (59 per cent) did so not expecting repayment. Of the parents expecting repayment, nearly 20 per cent said their child is yet to make one.
Almost half of these parents cut their expenses or delayed retirement to help their children.
Around one third of parents helped their children buy a home between 2017 and 2019. On average, they lent $73,522 to their children, up $9316 from 2017.
Since 2017, the total sum lent by BOMAD has increased from $65.3 billion to $92.3 billion in 2019.
New research reveals that 64 per cent of parents diverted their own savings to help their kids, while 16 per cent pulled money from their home equity and 13 per cent delayed retirement.
“The property market in Australia is incredibly challenging for younger generations to break into with property prices surging by 395 per cent in the last 25 years. For this reason the Bank of Mum and Dad has become an essential player in our nation’s housing market. Loan contributions have grown by 41 per cent in the last two years alone highlighting that the Bank of Mum and Dad will not be closing shop anytime soon,” says Mozo director Kirsty Lamont.
“It could be argued that such a dominance in family assistance is feeding into a greater inequality in this country with many first home buyer hopefuls without financial aid remaining locked out as property prices rise faster than they can feasibly save a deposit.
“Income to property ratios have changed dramatically in the past 25 years. At present, the cost of buying a property is 7.2 times the annual income of a typical household, whereas 25 years ago it was 1.6 times the annual household income.”
The survey revealed that:
- 43 per cent of parents let their children live at home to help them save for a deposit
- 32 per cent provide money for a home loan deposit
- 14 per cent act as a guarantor
- 10 per cent assist with repayments
- 9 per cent buy a property on their children’s behalf
- 6 per cent buy property as a partner.
And BOMAD goes beyond lending children money for a home, with 46 per cent of parents contributing towards a vehicle, 39 per cent helping with education costs, 33 per cent helping out with the bills and 27 per cent paying for household items such as couches and beds.
Nearly half of the respondents said they sacrificed their own savings or delayed their retirement in order to help their children, with one in four reporting financial hardship as a result.
“Many parents are feeling the pressure to help their children purchase their first property and for some, this is causing a real strain, especially when they find themselves working for far longer than they’d envisioned, or repayment deals are reneged on. With one in four parents providing assistance at risk of financial hardship, the path to property ownership is less than rosy for many families,” says Ms Lamont.
“For younger generations hoping to own their own home, it can certainly feel like a deal breaker whether or not Mum and Dad are available to chip in. While the property market can feel like a large fence to scale, there are ways for first home buyers to save for a deposit independently.
“From making a concentrated effort to blast debt to looking at first homeowner grants in your state and considering ‘rentvestment’, there are ways to make your first home purchase a possibility.”
Did you help your children buy their first home? If not, how do/did you help them? Do you view it as the role of a parent to help out where possible? Does this necessarily have to included financial assistance?
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