One third of all first-home buyers get their deposit with some form of financial assistance from their parents. A recent report into the demographics of first time mortgagees revealed that a whopping $12 million a year is being spent by parents to help their children into their own homes.

House prices are climbing at an unaffordable 10% a year, outstripping wage increases by more than 7%.

Andrew Hill from Expert Lending said, “Since the GFC, deposits as gifts have taken over first-time buyers relying on equity in their parents’ home to get a loan approved because it’s a lot financially cleaner for the family if things go pear shaped, such as defaults on the mortgage or divorce.”

Shouse auctionuch borrowing allows may allow the children to avoid expensive lenders mortgage insurance – imposed on high equity to borrowings ratio. However, parents taking money out of their own mortgage to boost their children into the market places them at risk too. Suddenly their own repayments become larger at a time when they are perhaps banking on having less debt.

Those in the housing market love it. The injection of intergenerational capital sustains an already inflated market, boosting their own commissions. Lenders will get their pound of flesh, it doesn’t matter who from. And builders reap the exorbitant prices for their homes as competition amongst buyers pushes house prices into the stratosphere.

The study found that parents typically funded their children’s first mortgage by an average of 10%. With 80% of first home-buyers receiving some form of financial assistance at sometime throughout the mortgage process.

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