First-home buyers are making a comeback with a helping hand
FIRST-home buyers are muscling their way back into the property market despite property prices continuing to rise across the country.
But many entry-level buyers aren’t doing it alone — new figures released by the Mortgage and Finance Association of Australia show they’re getting a helping hand by using “mum and dad” loans.
Parental guarantee loans — where the borrower uses the equity in their parent’s own home to act as security for their mortgage.
housing affordability was “not improving” for entry-level buyers who were leaning on their parents to help them get a foot onto the property ladder.
Parental guarantee loans represent over 15 per cent of loans written
But a lot of people getting these loans do have savings but their parents are helping them break into the market and avoid mortgage insurance.
Lenders mortgage insurance hits borrowers when these have less than a 20 per cent deposit on the property and it can costs thousands of dollars — however the insurance protects the lender not the borrower.
Latest CoreLogic figures show the average median house price in Sydney is $782,000 (up 13.1 per cent year on year), Melbourne $590,000 (up 13.9 per cent), Brisbane $475,000 (up 7.1 per cent), Adelaide $415,000 (3.9 per cent), Perth $506,000 (down 4.2 per cent), Hobart $335,000 (up 6.1 per cent), Darwin $519,000 (down 3.5 per cent) and Canberra $550,000 (up 10 per cent).
With a guarantor loan you can borrow the full purchase price, the stamp duty and even in some cases borrow a little to consolidate a small debt.
Latest data from Mortgage Choice shows year-on-year of their total loan book in most states first time buyer numbers have climbed — NSW 3.63 per cent (up 0.29 per cent), Victoria 13.53 per cent (up 3.68 per cent), Qld 26.63 per cent (up 12.18 per cent) and SA 4.38 per cent (up 1.42 per cent).
Spokeswoman Jessica Darnbrough said she expects to see an increase in parental loans being given the green light in the coming months.
“As property price growth continues to outpace wage growth, I would expect to see more and more parents helping their children onto the property ladder through parental guarantee loans,” she said.