Victorian parents to the rescue in ‘broken’ property market
Recent research shows how huge the input has become from parents assisting their children to buy their first property. Financial comparison site mozo.com.au asserts that 29% of parents contribute financially by way of either loaning part of the deposit, guaranteeing the loan or providing rent free living to assist in saving a deposit, being among the main means of assistance. This puts this sector at the fifth largest lender behind the big four banks. Whilst we have all known intuitively that significant help has been offered, the scale is impressive.
The fact that it is necessary is unfortunate but with price growth of over 600% over the last 30 years nationally and even higher in Victoria, without it, many more first home-buyers would be simply unable to enter the market. Parents have had to be creative in their assistance. The most dangerous of these options is guaranteeing the mortgage, as any difficulty in repayment will suck the parents into financial obligations not directly of their own making. No parent would want to see their child in financial trouble but risking their own financial security is not to be taken lightly. Better to subsidise living costs, gift or lend money that you can afford to lose (hope for the best but plan for the worst) than risk hard earned assets.
Mum and Dad’s bank has to stay strong and secure.