A growing number of Australian families have helped a family member buy their first home by providing financial assistance according to new research by industry super fund-owned bank ME.
According to a survey of 2,000 mortgage holders by ME, 20% of Australian families have provided financial assistance towards a family member’s first home, while 26% of first home buyers said they received assistance from their family.
According to the survey, loans or gifts where the most common form of financial assistance provided, with 22% of those surveyed saying they received a gift or loan while 5% reported they received support through a guarantor.
The survey also revealed 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’.
The practice is also having an increased impact on people’s retirement options.
Twenty eight per cent of respondents who have financially helped a family member buy a home ‘within the last five years’ said the decision had affected their level of comfort in retirement, up from 21% of those who gave financial help ‘more than five years ago’.
Patrick Nolan, head of home loans at ME, said the willingness of people to sacrifice comfort in retirement illustrates the challenges home buyers currently face.
“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,” Nolan said.
“It’s becoming increasingly difficult for parents and grandparents to help family members buy a first home while protecting their own retirement plans,” he said.
While some people may have put their retirement plans at risk, others are making sure their generosity doesn’t come back to bite them.
According to the survey 24% of people who lent money to family member in the past five years included interest as part of the loan compared to just 12% of people who lent money more than five years ago.
There was a corresponding fall in interest-free lending among family members, down from 39% of those lent money more than five years ago to 23% of those who lent money within the last five years.
“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,” Nolan said.
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