With high property prices making it harder to enter the property market more Australians are approaching their parents for a financial hand.
More than 55% of first time home buyers require financial assistance from their parents, with the average cash contribution being around $89,000.
According to a report in the Australian Financial Review lending by the Bank of Mum and Dad has increased by 25% to about $20 billion.
Parent lending growth compares to a 2% overall increase in interest only lending and 8 per cent for principal and interest loans.
In fact, parents lending to their children for property purchases, is now the tenth largest lender, bigger than ME Bank, AMP Bank and the local operations of global bank like Citigroup and HSBC Australia.
The number of children needing financial assistance getting into the property market is increasing as the total number of first time home buyers continues to fall, which means many without parental support could be giving up.
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Younger buyers seem to have more difficulty to saving their deposits because of flat incomes, rising living costs and the need to have a substantial deposit to qualify for the state-government first home owner grants.
On the other hand, their parents have benefited from significant increases in the value of their family homes, giving them plenty of equity to borrow against to help their children.
The Hotel of Mum and Dad
Others, rather than borrowing from the Bank of Mum and Dad, are checking into the Hotel of Mum and Dad, opting to move back home while they save for a deposit.
They are finding the surging the cost of living in Australia’s capital cities too expensive cities meaning that if the can couples live with their parents free of rent, utility costs and even food bills, the money they save can go towards their deposit.
These savings can add an average of $22,117 per year to their deposit, according to Domain.