Bank of Mum and Dad report 2020: Meet Australia’s fifth biggest home loan lender

Ceyda Erem

04 Mar 2020

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If we asked you to name the fifth biggest lender in Australia, you’d be forgiven for naming one of the big four banks. But according to new Mozo research, the answer lies a little more close to home. 

Mozo data has revealed that the Bank of Mum and Dad still holds the title as the fifth biggest home lender in the country and are lending an average of $73,522 to help their children take that first step on the property ladder - nationally, that number skyrockets to $92 billion and is up 41% from 2017. 

When Mozo first investigated the Bank of Mum and Dad, total national lending by parents reached $65.3 billion and saw 29% of parents giving their child a leg-up onto the property ladder.

 According to a Domain property report that was released in April 2019, the average median property price in Sydney sat at an eye-watering $1,027,962. What’s even more disheartening is that property prices haven’t slipped below $1 million since 2015, making settling down to have a family all the more challenging. 

“The property market in Australia is incredibly challenging for younger generations to break into with property prices surging by 395% in the last twenty five years. For this reason the Bank of Mum and Dad has become an essential player in our nation’s housing market,” said Mozo Director, Kirsty Lamont. 

“Loan contributions have grown by 41% in the last two years along highlighting that the Bank of Mum and Dad will not be closing shop anytime soon.”

The Bank of Mum and Dad now sits behind the big four banks, CommBank, ANZ, NAB and Westpac, but still ahead of major lenders, ING and Suncorp. 

How the Bank of Mum and Dad is footing the bill (and paying the price) 

They say the love a parent has for their child holds no bounds and to give their child a chance of having a place to call their own, Aussie parents are pulling out all the stops. 

The research revealed that 64% of parents dipped into their own savings to come up with the funds, 34% cut back on expenses and a small 16% used cash from their home’s equity. 

“Many parents are feeling the pressure to help their children purchase their first property and for some, this is causing a real strain, especially when they find themselves working for far longer than they’d envisioned or repayment deals are reneged on,” said Lamont. 

Allowing adult children to live at home rent-free still remains the most popular way of providing assistance, with 43% of Aussie parents doing so. 32% said they provided money for a deposit, 14% acted as a guarantor and 10% assisted with home loan repayments. 

Purchasing property on behalf of their child or as a partner were less popular methods, sitting at 9% and 6%, respectively. 

For many parents, handing over their savings came with no strings attached, as majority of parents did not expect repayment from their children. 

But for those that did ask for repayment, almost 20% admitted they are still waiting for their reimbursement, potentially causing a rift between families.

And for some families, chasing down repayments is the least of their troubles, as one in four parents revealed they were at risk of financial hardship and stress as a result of their generosity. 

“With one in four parents providing assistance are at risk of financial hardship, the path to property ownership is less than rosy for many families,” Lamont warned.

And unfortunately, the “path to property ownership” is filled with a few speedbumps.  

Of those parents who acted as guarantor for their child, more than a quarter (26%) reported that their child had defaulted on their loan, which resulted in a call from the bank. One in five parents who had an agreement with their child to make repayments said that they had missed their deadlines. 

Parents covering more than just the property 

To give their children the best chance to save up, some Aussies parents are providing financial assistance by any means necessary. Almost half (46%) of parents had contributed toward purchasing a vehicle for their children, followed by helping with educational costs (39%), ongoing bills (33%) and picking up the cost of household items, like beds or couches (27%). 

What does the future hold for the Bank of Mum and Dad? 

As property prices are expected to increase in major cities across the country this year, it won’t be long until many young Aussies find themselves turning to their parents for help. 

With the Bank of Mum and Dad already experiencing a 41% increase within the last two years, it’s possible that we could see this number continue to climb and potentially one day take out the top spot as Australia’s biggest lender. 

And according to Lamont, the Bank of Mum and Dad’s growth as a lender may be due to a wider inbalance within the Australian economy. 

“It could be argued that such a dominance in family assistance is feeding into a greater inequality in this country with many first home buyer hopefuls without financial aid remaining locked out as property prices rise faster than they can feasibly save a deposit,” she said. 

“Income to property ratios have changed dramatically in the past twenty five years. At present, the cost of buying a property is 7.2 times the annual income of a typical household, whereas 25 years ago it was 1.6 times the annual household income.” 

Taking out a home loan in 2020 

No matter how your parent is chipping in to help land you your first property, one thing for sure is that you’re going to need a great value home loan to seal the deal. 

You can compare more than 500 home loans with our home loan comparison tool, all you need to do is punch in your loan terms and our tool will pull some of the top offers available. 

Compare first home loans

Rates updated daily. Advertiser disclosure.

  • loans.com.au

    2.88% p.a.
    fixed 3 years

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    Product details Close details
    Fixed Home Loan

    This home loan is available for purchase or refinance, complete with 1, 2 or 3 year fixed rate options. Minimum 10% deposit required.

    • 2.88% p.a.
      fixed 3 years

    • 2.89% p.a.

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  • Suncorp

    2.69% p.a. variable

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    Product details Close details
    Back to Basics Special

    No monthly account keeping fee, no ongoing annual fee and no loan establishment fee on new lending of $150,000 or more. Get a $2,000 cash bonus when you refinance with an eligible Suncorp Bank Home Loan of $250k+. T&Cs & eligibility criteria apply. Minimum 10% deposit.

    • 2.69% p.a. variable

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    • Refinance from another lender to receive a $2,000 cash bonus for loans of at least $250,000 or $3,000 bonus for loans over $750,000. Available for loans with an LVR <90% and applications made by 18 December 2020 and settled by 26 March 2021.

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  • CUA

    3.14% p.a. variable

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    Accelerate Variable Home Loan

    No monthly or annual fees. Free 100% offset multi-account. Unlimited fee-free repayments. Free redraw. Winners of Mozo's Experts Choice Australia's Best Large Credit Union in 2020^

    • 3.14% p.a. variable

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    • $835

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^See information about the Mozo Experts Choice Home loans Awards