The Reserve Bank of Australia has announced it will leave the cash rate unchanged at 4.35 per cent but that will be cold comfort for home buyers with housing prices tipped to increase in all capital cities except for Hobart.
While a steady interest rate is good news for mortgagees, it’s swings and roundabouts for the bank of mum and dad.
Parents have been increasingly helping out their children to enter the property market as interest rates have risen over the past few years and housing has become more unaffordable.
Unchanged interest rates should ease mortgage stress, but increasing housing prices makes it harder for first-home buyers to take their first step on the property ladder, forcing them to turn to the ‘bank of mum and dad’.
Monthly gain
Property analysts CoreLogic found its home value index is up 0.6 per cent in February, which was the strongest monthly gain since October 2023.
The biggest price increase was for Perth at 1.8 per cent, with Hobart housing prices falling 0.3 per cent.
The Productivity Commission estimates that if the bank of mum and dad was an actual bank, it would be somewhere between the fifth and ninth biggest mortgage lender in Australia.
Jarden economists surveyed 282 mortgage brokers and found assistance from family contributed 1 per cent of new lending. They received an average $92,000 from their parents to buy a home, Jarden found.
But with much of the bank of mum and dad lending covered by private arrangements, the number could be considerably higher.
The median dwelling price across the combined capital cities is about $789,000, but only a dwelling that costs $427,000 or less would be considered affordable to someone with a 20 per cent deposit and average full-time earnings.
Property predictions
Impact Economics and Policy lead economist Dr Angela Jackson told Domain buying property without parental help was becoming increasingly hard.
“We’ve got to a point where you can’t own a property in this country unless your parents support you, it has a big impact on equity,” she said.
“It’s no longer a connection between your own efforts and your rewards in life. That isn’t good for society in terms of equity and future productivity.”
AMP data has found that the difference between actual house prices and affordable house prices is the biggest it has ever been since 1984.
AMP predicts housing prices of 3 to 5 per cent for this year with “access to the bank of mum and dad” just one factor putting a floor in the market.
“The ongoing resilience in the property market suggests it’s still being dominated by the supply shortage and by the prospect of lower interest rates later this year boosting buyer confidence,” the report stated.
Have you given money to your family to help them get on the property market? Why not share your experience in the comment section below?
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