6 May, 2016
Twenty per cent of Australian families have provided financial assistance to other family members to help them buy their first home, according to new research by industry super fund-owned bank ME.
And 26% received financial assistance from a family member to buy their first home.
An increasing number of family members said they were sacrificing retirement plans to help family members buy their first home.
Twenty eight per cent of those who have financially helped a family member buy a home ‘within the last five years’ said their generosity has affected their level of comfort in retirement, up from 21% of those who gave financial help ‘more than five years ago’.
The survey also shows the amount being loaned or gifted between family members to buy property has increased from an average of $27,000 ‘prior to the last five years’ to $42,000 ‘within the last five years’.
Loans or gifts where the most common form of financial assistance provided, with 22% of those surveyed saying they received a gift or loan and 5% reporting they received support through a guarantor.
ME’s head of home loans, Patrick Nolan said the findings are more evidence of the impact high house prices.
“That a significant number of Australians are receiving and giving financial assistance to buy a first home and that an increasing number of givers are doing so at the expense of their retirement, is further evidence of the challenges of house prices, which have risen steeply over the last few decades.
“It’s becoming increasingly difficult for parents and grandparents to help family members buy a first home while protecting their own retirement plans.”
More interest-based lending:
The findings also found a significant increase in interest-based lending between family members for the purposes of buying a first home, up from 12% of those who lent money ‘more than five years ago’ to 24% of those who lent money ‘within the last five years’.
There was a corresponding fall in interest-free lending for the same purpose, down from 39% of those lent money ‘more than five years ago’ to 23% of those who lent money ‘within the last five years’.
ME said the increase in interest-based lending within families was likely a case of parents using a ‘price signal’ to provide a life lesson about the value of money.
“Like many parents made their children do odd jobs to earn pocket money, now they’re making them pay interest on the financial help they’re giving to buy their first home.
Note about the survey: Survey conducted via RFi Group in March using an online survey method. Survey completed by 2,000 mortgage holders.