More parents going guarantor for kids, research shows

Adam Smith 23 November 2016

Fall in capital city median house price REIAParents are increasingly helping their children get into the property market, new research has shown.

According to a Fairfax report, figures from both NAB and Westpac have confirmed that guarantor loans are becoming increasingly common. The loans see parents or close family members provide their property as security for a home loan, eliminating the need for a deposit.

NAB told Fairfax guarantor loans had risen from 4.8% of all new loans in 2010 to 6.7% last year. A Westpac spokesperson also told Fairfax that the number of guarantor loans through its St.George subsidiary had risen 9% in the last year.

Westpac’s consumer bank head, George Frazis, told Fairfax that guarantor products could help first home buyers struggling to save a deposit, while still limiting the risk to parents helping their children.

“If the parents have got equity in their home, they can use that equity to secure the deposit required for the children to buy their home, but are only exposed to the level of that deposit, not the whole value of the home,” he said.

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