Surveys Say Mum & Dad Home Loans are Popular
A recent survey by State Custodians has uncovered something interesting about first home buyers across Australia. Apparently, 29 per cent of Australians aged 34 and under are using the “Bank of Mum and Dad” (the fifth largest lender over Suncorp and ING DIRECT) to get their deposits for a new mortgage.
Another 26 per cent survey respondents claim they are waiting for their inheritance before they buy a home. They are all relying upon their parents to help them buy a new home.
Another survey by Mozo, reported that the “Bank of Mum & Dad” is second only to Australia’s largest lender. This survey also reported that Mum and Dad have lent about $65.3 billion to new home buyers in Australia in recent years.
Average Parental Home Loans
On average, families have given loans of $64,206 across the country. This number is higher in New South Wales at $88,250 and considerably lower in the Northern Territory at $15,000 and in the Australian Capital Territory at $20,083.
Mozo found that unlike Mum and Dad’s competitors, these home loans seldom come with repayment obligations, with only one-third being paid or partially repaid.
Working Out the Deposits
State Custodians reports that the average Australian citizen would need to put away $1.116 per month for five years just to afford the 20 per cent deposit required on the average first home buyer property.
This fact is likely a driving force behind the generosity of the contributions of parents helping their adult children get into their own home. The money they are loaning is going towards just the deposit in most cases, and this is one of the primary ways parents assist their children. Mozo says 41 per cent of parents are taking this approach. Likewise, 41 per cent of parents are also helping their kids by letting them live at home rent-free.
Less popular parental assistance:
- Buying property outright for their child – 9 per cent
- Acting a guarantor – 13 per cent
- Loan repayment assistance – 9 per cent
Some parents are taking from their own home equity to help their kids get into a new home in Australia.
The Settlement isn’t the End
The issue doesn’t stop at settlement of a home loan. According to the REIA’s Housing Affordability report and the Adelaide Bank the increase to first home buyers for the average loan went up by 1.2 per cent, to $365,600 since June.
The trend of using the “Bank of Mum & Dad” is not only causing the rise in home loan deposits, but also repayments of mortgage loans for Australians who don’t make it onto the home buyer ladder. 31.4 per cent of the median family income is now imperative for meeting mortgage repayment obligations, which is a rise of 1 per cent since the last quarter. On the other end of the spectrum, renters have seen a slight decline, dedicating 24.3 per cent of their income to housing.
With all these goings on in the world of home loans, the large deposit challenges and repayment obligations aren’t making a poor impact on Australians as the number of first time home buyers is up by 14 per cent since the previous quarter.
First Choice Mortgage Brokers are a Sydney Mortgage Broker operating under the Australian Credit Licence Number: 382370