Australian parents are increasingly putting their assets on the line by guaranteeing home loans taken out by first home buyers, new figures from National Australia Bank show. The proportion of first home buyers securing loans with a relative acting as guarantor has increased from 4.8 percent in 2010 to 6.7 percent.
With the backing of a family member, first home buyers with relatively small deposits can secure loans without mortgage insurance.
"It's getting a lot tougher for first home buyers to enter the market. The rise in house prices has been pretty well-documented, particularly in Melbourne and Sydney, where prices have increased by circa 50 per cent since 2008," NAB's executive general manager for consumer lending, Angus Gilfillan, told The Australian Financial Review. "All of this means that first home buyers need a larger deposit and we're seeing that first home buyers are, effectively, being crowded out of the market."