Broker sees influx of 'Bank of Mum and Dad' home buyers

author-avatar By on September 10, 2021
Broker sees influx of 'Bank of Mum and Dad' home buyers

The rise of the 'Bank of Mum and Dad' has been a hot button topic as young home buyers struggle to cobble together a home deposit.

It's a tongue-in-cheek moniker for the rising trend of young home buyers going to their parents for financial help amid soaring property prices.

But by some metrics, the Bank of Mum and Dad (BOMAD) is also Australia's ninth-biggest lender in terms of home loans under management. 

Marcus Roberts, mortgage broker and founder of Brighter Finance, says he's noticed a higher proportion of first home buyers using the BOMAD method, with as many as one in two going to their elders for help.

"In conversations with parents, they often bring up low interest rates on their own savings and nest eggs as a contributing factor, as they feel assisting the kids now is worth more than the small interest received on their savings through term deposits or savings accounts," Mr Roberts told Savings.com.au.

However, parents aren't necessarily going guarantor on the home loan, which can pose a few risks.

"We are finding more parents providing gifts than feeling at ease becoming guarantors or providing a property towards the purchase. This limits the parents' obligations, and keeps the gift of cash as the only assistance that has been granted," Mr Roberts said.

Mr Roberts also said government stimulus targeted at first home buyers tends to drive competition.

"Anecdotally we do seem to see competition at certain price thresholds, being either stamp duty concessions/exemptions or government assistance programs such as the First Home Loan Deposit Scheme thresholds," he said.

"Low interest rates are attracting other types of applicants, such as investors, in to the market - everyone's competing for the same properties."

    Australian Bureau of Statistics' lending indicators data shows investor lending has bounced back strongly compared to a year ago (chart below).

    In original terms, the average loan size in July for first home buyers was $460,393, while for investors it was $523,343, indicating they are buying in similar price bands assuming deposit sizes are the same.

    A 20% deposit assumes a purchase price of $575,491, and $654,178 respectively. 


    Photo by Gabriel Valdez on Unsplash

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    Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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