Buyers beware, especially the growing number of young Australians turning to the bank of mum and dad for help stumping up home loan deposits.
Accounting for $29 billion annually, BoMaD is the nation s ninth-largest mortgage lender and a port of call for almost 4000 kidults every month, according to comparison site Finder.
While it s natural for parents and grandparents to offer what they can, housing specialist Martin North is not sure in this case it s always good thing.
His company, Digital Finance Analytics, conducts a rolling national household survey which has tracked the massive spike in BoMaD borrowing.
He says the average loan is a whopping $90,000 but that s not the real concern. It s the fact that adult children who borrow from parents are three-to-five times more likely to default on their mortgage within five years.
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Low fixed-rate mortgages have helped many first-home-buyers but they have also created an economic time bomb that could explode in three years.
Westpac, Australia s second biggest bank, has revealed that between September 2020 and March this year, 32 per cent of borrowers fixed their mortgage rate.
That was a dramatic rise from 23 per cent in the six months leading up to the onset of the Covid pandemic in March 2020.
Since then, a higher proportion of Westpac borrowers have also fallen behind on their mortgage repayments despite the record-low interest rates.
Westpac, Commonwealth and NAB are offering fixed rates of under 2 per cent with ANZ the only major bank not to do so.
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Last week, Tarric Brooker posted some stunning charts at
News.com.au, gleaned from Digital Finance Analytics surveys, showing the record rise in financial assistance from the ‘Bank of Mum & Dad’, which is helping to fuel the boom in first home buyer (FHB) demand and Australian property values.
Just prior to the pandemic, only 8% FHBs were receiving support from their parents – the lowest proportion since 2011. However, this has since soared to more than 60%, meaning a record share of FHBs are now receiving financial assistance from their patents:
A record share of Australian first-home buyers are now receiving financial assistance from their parents.