Some parents are accumulating debts while helping their children.
Australian parents and grandparents are being advised to keep an eye on their own financial stability when assisting their children enter the real estate market.
A new study by financial comparison company Compare Club shows that the “Bank of Mom and Dad” has become a popular source of funding for young Australians looking to purchase their first homes.
This is due to the cost of living crisis and high rental prices, putting increasingly heavy economic burdens on young people.
A survey of 1,000 people revealed that approximately 20% of parents have provided significant financial assistance to their children, with gifts and loans often totaling $75,000 AUD (about $46,500 USD) or more.
Furthermore, another 47% of parents are considering doing the same.
Compare Club states that parental support has led to 6% of parents accumulating debts, with about 2% turning to reverse mortgages for help.
Kate Browne, research director at Compare Club, said, “For many young Australians, their parents’ bank accounts remain one of the few viable paths to property ownership, but the cost to their parents’ financial security remains to be seen.
“When parents deplete their savings or go into debt to help their children, they often sacrifice their own financial stability.
“We have seen cases where parents’ bank accounts essentially operate as unregulated lending institutions with no safety net.”
Browne emphasizes that while many older Australians have the means to help their children buy property, they should consider the impact on their retirement funds.
“For example, in terms of health, people need to ensure they have enough money to access aged care,” she said.
Browne points out that options like reverse mortgages may provide assistance, but they often come with high interest rates.
Meanwhile, Compare Club reveals that more and more Australians are feeling the pressure of bills.
According to the company’s stress index, the percentage of high-income households spending over 75% of their income on bills has surged by 246% since May 2024.
Utilities top the list, with 45% of respondents citing it as their main source of stress, followed by mortgage repayments (26.2%) and rent payments (20.1%).
The research by Compare Club was conducted after new data from CoreLogic suggested shifts in the dynamics of the property market.
In December 2024, national house prices in Australia dropped by 0.1%, marking the first decline in nearly two years.
Tim Lawless, research director at CoreLogic, said, “In the second half of this year (2024), the growth in housing values has been weakening as affordability constraints dampened buyer demand, while advertised supply levels have been rising.”
The original article titled “Parents Warned to Keep an Eye on the Bank When Helping Kids Buy Homes” was published on the English edition of the Epoch Times website.