FINANCIAL PRODUCT

Product: Family Springboard Offerer: Westpac (via the Banco de Mum and Dad) Offer dates: Launched on Wednesday, available wherever there is sufficient money and love. How they work: We’re seeing a new money phenomenon – people who feel obliged to fund their children into homes to save them from renting long-term. Property prices have left younger people facing increasingly expensive houses and long periods of high mortgage repayments.

Add to that the Reserve Bank’s plan to introduce restrictions on the number of loans banks can make where the deposit is 20 per cent or less. It appears the Reserve Bank does not care if there is a second mortgage, so long as the bank does not have exposure of more than 80 per cent of the value of a home when the loan was made.

While the Banco de Mum and Dad can supply that second mortgage, Westpac is encouraging them to guarantee the loan instead using its Family Springboard. The product lets home buyers leverage an immediate family member’s savings or home equity to top up their deposit with the bank.

No cash changes hands, so the family member can help without having to forgo interest on their savings. The guarantee is limited to a specific proportion of the loan, so that errant children do not pull the rug from beneath their parents’ feet. If the property value rises or the ‘‘springboard’’ debt is repaid, the mortgage can then be restructured to stand alone without the family member’s help. What we like: Guarantees can cause a lot of grief if things go pear-shaped, so Westpac’s limiting of the family’s exposure is very sensible. It will also help the kids avoid low-equity fees, which add another 0.5-1 per cent to typical interest rates. What we don’t like: House prices so high that owning a house becomes an ambition open to those who have access to equity from wealthy family members. Houses are for living in, not living for. Conclusion: Expect guarantor loans to increase in prevalence.