New research has revealed that the Bank of Mum and Dad is now the fifth biggest lender in Australia, with $65.3 billion lent to children and 67 per cent of parents not expecting repayment.
The research from financial comparison website Mozo.com.au, shows that 29 per cent of parents help their children buy a home.
The Bank of Mum and Dad sits behind the Big Four banks – ANZ, Commonwealth Bank, NAB and Westpac – on the nation’s biggest lenders list.
The ranking indicates how difficult it is for many first home buyers to independently take their first step on to the property ladder.
Around 1.02 million families offer an average of $64,206 in assistance to their children.
“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. We’re seeing the Bank of Mum and Dad playing a huge part in helping children take their first step towards acquiring a home,” said Mozo Director Kirsty Lamont.
“With Australian property prices rising by 618 per cent over the past 30 years and national incomes failing to keep up, the Bank of Mum and Dad is proof of family generosity but also points to a broken property market for younger generations.”
The most generous state for lending is New South Wales, which loans an average of $88,250 per family, totalling $32.7 billion. Victoria and South Australia are next at equal second equal, lending around $63,000 per family. The territories, ACT and NT are the least generous, lending $20,083 and $15,000 per family respectively.
The survey also revealed that, as well as contributing money towards a deposit, 43 per cent of Australian parents are allowing their child to live at home rent free to help them save for a home.
Assisting with repayments costs parents an average of $31,711 a year, while allowing kids to live at home rent-free costs an average $25,441 a year.
Other options include acting as a guarantor (13 per cent), assisting with repayments (9 per cent), or buying property on behalf or with the child (9 per cent).
To help their kids onto the property ladder, 66 per cent of parental lenders used their savings, while 26 per cent reduced their expenses and 13 per cent accessed the equity in their home.
“For younger generations aspiring to own their own home, the sheer luck of family assistance can be a deal breaker as to whether or not they have the opportunity to purchase their own property. While it may be cause for despair, there are ways for first home buyers to save for a deposit without the help of Mum and Dad. From ditching credit card debt to looking at first home owner grants in your state, there are ways to make your first home purchase a possibility,” said Ms Lamont.
Have you loaned your children money to help them buy a house? How did you go about it? Do you expect repayment? Or have you a repayment scheme in place?