With the way today’s home prices are going, it’s no wonder we’re seeing an ever-increasing trend of first home buyers borrowing more from mum and dad.
In fact, around a third of these are relying on their parents to chip in, in order for them to buy a property.
With such staggering figures comes results from Mozo, a financial utilities site, suggesting that mum and dad have become the fifth largest lenders in the country, only to be beaten by the big four banks!
Mozo also made some recent interesting discoveries on the topic, including:
- An average of $44,694 is ‘lent’ to children to buy their first home.
- 29 percent of parents give the children $64,000 or more.
- Around 67 per cent of parents aren’t expecting to get the cash back, with 9 per cent putting off their retirement to a later date.
- Collectively, parents had contributed over $65 billion to the Australian property market.
Parents have been financially assisting their kids for decades, however it’s only been in recent years that this reliance for a home deposit has become almost a necessity, and it’s scary.
And if such a significant number of parents are not expecting to be paid back, of course the young ones are going to want to get their hands on as much as they can from a free source.
This is generally not given to them as a cash hand-out, but rather from equity built up in the parents’ home.
However, it’s not always a home to live in that they want to buy, and oftentimes the financial assistance will be put towards an investment property. This is a great way of bulking up their deposits in the future to buy a home they’d rather live in, perhaps in their ideal location in which they can now only afford to rent.
Although not all parents are on board or may not be able to afford it, the next best move is to assist them by allowing them to move back in, relatively expense-free.
But it makes sense – house prices continue to soar, wages stay stagnant and the cost of living goes up and up and up. How else are young people supposed to buy property? Are they just meant to rent till the day they die?
The most popular form of assistance at the moment is to let children move back home and live rent free, all the while contributing to a deposit.