Let’s shut the Bank of Mum and Dad

THE Bank of Mum and Dad is being urged to consider turning off the money taps with an increasing range of mortgage products helping young homebuyers get a start.

Shared equity schemes – where lenders share in capital growth in return for a lower loan amount – are expanding across Australia and reducing pressure on parents to pay deposits or go guarantor.

Low-deposit loans by government authorities and other lenders help university graduates and singles buy homes faster and avoid lenders mortgage insurance, while the Federal Government’s First Home Super Saver Scheme allows buyers to boost their savings in the low-tax superannuation environment.

Ryan Coward, 26, bought a three-bedroom home using a HomeStart finance graduate loan, which only requires deposits of less than 6 per cent.

“Lots of people my age receive parental assistance (with) the deposit but I had no financial help,” he said.

“My parents supported me and came with me to opens, but I’m really happy that I’ve done it on my own. It’s a good feeling, knowing that I am financially independent.”

HomeStart chief executive officer John Oliver said parents trying to “be the bank” were jeopardising their own financial security. Fairness also came into the equation for parents with more than one child, he said.

“What about child two, three, maybe four?” Mr Oliver said. “I know that as parents we all want to help our children equally, so being the bank for one will ultimately create future financial pressure for you when your other children are ready to buy their first home.”

Planning for Prosperity senior adviser Bob Budreika said banks should never have allowed so many parents to go guarantor for their children’s mortgages and stump up their own homes as security.

“Parents can’t help themselves,” he said. “People don’t realise the risk they are running. A reverse mortgage at retirement age is a better option: there’s no need for regular repayments, parents can’t lose their home and they still have the ability to repay.”

Mr Budreika said young buyers needed to lower their “champagne expectations”.

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