Real Bank of Mum and Dad charges revealed – realestate.com.au

The Bank of Mum and Dad gives an average cash gift of $40,000, with saving for a deposit still the biggest hurdle for aspiring young buyers as property prices soar further out of reach.

New data shows just under a third or 29 percent of Australian homeowners with a mortgage have received financial help from their parents, while 13 percent have given money for a deposit.

Compare the Market’s Household Budget Barometer analyzed the broad impacts of rising costs of living on the path to homeownership. It found that 63 percent of first home buyers struggled to make a deposit, despite most making sacrifices such as cutting back on travel and leisure.

Saving a down payment is the biggest hurdle to homeownership.

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The report comes as the federal government’s expanded Home Guarantee Scheme was launched this month, abolishing location and income limits and raising property price caps to allow more first home buyers to enter the market with a five per cent deposit and no Lenders Mortgage Insurance (LMI).

Compare market property expert Andrew Winter said the plan could mean the Bank of Mum and Dad “finally gets[s] a break”, after “some hardcore lending in recent years”.

“It’s also great news for would-be buyers whose families don’t have the resources to contribute. There’s now a more level playing field for people who can’t rely on help from wealthy parents,” Winter said.

Compare market real estate expert Andrew Winter.

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But the low deposit system could push up property prices further, potentially leaving young buyers with huge debts over the life of their loans.

“Raising a down payment is just one hurdle. First-time buyers are faced with larger loans and bigger payments and that could mean that the pain that once came with raising a 20 percent down payment is instead spread over the life of the loan as homeowners have to grapple with more interest,” Winter said.

“It is now more important than ever to ensure you have a competitive interest rate on your home loan, to minimize the interest you pay and ensure you can make your repayments comfortably.”

More than half of buyers were priced out of desired areas.

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The Compare the Market report found that about 53 percent of buyers were no longer able to reach the areas they wanted, while 31 percent said there was a lack of available homes on the market.

One in ten buyers said a lack of transparency around seller expectations had become a barrier when looking for a property.

“Australia’s affordability dilemma is a big messy problem,” Winter said.

“But simply put, there are more people than there are properties to house them in. Shortages create demand and demand forces prices up.

“Higher property values ​​remain a major hurdle for many would-be buyers.”

Buyers canceled their vacation plans, took on a part-time job or moved back in with their parents to save money.

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The report shows that only 43 per cent of Greater Brisbane suburbs are affordable to middle-income couples.

The sacrifices potential buyers made to boost their savings included canceling vacation plans (24%), taking on a part-time job (21%), selling their belongings (18%) and moving back in with their parents (9%).

Chaice Paterson, founder of Low Deposit Homes, said improved schemes and grants have dramatically reduced the savings needed to get on the property ladder. The required deposit for a brand new property priced at $1 million was reduced last year from $122,000 to $54,500 for eligible buyers, taking into account the stamp duty exemption and all purchase costs, Mr Paterson said.

Chaice Paterson, founder of Low Deposit Homes, and his wife Libby.

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But the options for first home buyers in Brisbane and the Gold and Sunshine Coasts to qualify for the First Home Guarantee remained limited, despite property price caps being increased to $1 million in those areas.

“In Greater Brisbane you basically look at Logan or Ipswich, and even then it becomes very difficult to find an established property under a million dollars,” Mr Paterson said.

“It’s why so many people are committing money to freeing up land, they know it’s their best chance.”

Mr Paterson camped out with clients overnight before new lots became available on a southeast Queensland estate, where 120 hopeful buyers signed up for just 20 vacant lots priced at about $300,000 each.

Real Estate Buyers Agents Associate of Australia (REBAA) president Melinda Jennison said affordability remains a major barrier for young buyers, with house prices rising by as much as $50,000 in the past month as panic buying swept the market ahead of the government plan.

Buyer’s Agent Melinda Jennison.

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“Properties that sold for $750,000 last month are now selling for almost $800,000,” Jennison said.

“Many buyers are reportedly panicking because they are buying something sight unseen or paying too much to secure a property.

“What was $800,000 will soon be $900,000, which will make it even harder for first-time buyers to secure financing for a home, even with the plan’s five percent down payment.”

Aaron Scott, founder of property comparison service bRight Agent, said the wider availability of 95 per cent home loans without LMI comes with hidden costs for first-time buyers.

“The first decade of paying off your mortgage is the hardest,” Scott said.

“This period typically takes the smallest principal amount off your loan, meaning you’re paying a lot and not really getting ahead.

“A 95 percent loan, no matter how you arrange it, essentially just extends this difficult part of the cycle.”