Finder’s Graham Cooke is worried this trend of tapping the Bank of Mum and Dad to get into the property market could be having an impact on prices. (Source: Finder/Getty)
The Bank of Mum and Dad is contributing to the rise of Australian property prices and boxing people out from entering the market, experts are warning. Aussies across the country have been tapping into their parents’ bank accounts to boost their deposits so they can get into the market.
But economists are worried about this trend, with a Finder survey of 26 industry insiders finding 31 per cent felt the Bank of Mum and Dad is distorting the property market. Finder’s head of consumer research Graham Cooke said buying a home without assistance feels “almost impossible” these days.
“Those who can lean on mum and dad are typically entering the market not just sooner, but in a much stronger position. This adds to the inequality in the market for those who don’t have this option,” he said.
The University of Sydney’s Stella Huangfu agreed, and said first-home buyers are rocking up to auctions with much more confidence thanks to their parents’ contribution.
“This pushes up prices, especially in already competitive areas. It also deepens inequality, as those without family support are left further behind,” she said.
Freedom Property Investors’ Scott Kuru added that it’s “clear” many young people are “only getting into the property market with help from older and usually cashed up family members”.
Getting into the market faster means more buyers competing for a limited number of properties. More competition can equal higher prices.
Finder data also revealed that 17 per cent of first-home buyers had recently relied on help from their parents, which is up from 11 per cent in 2022, showing the trend is becoming increasingly important to getting on the property ladder.
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However, not everyone thought this trend was necessarily responsible for driving up prices.
“[Parents] are not a distortion, they are correcting the market distortion created by the severe lending restrictions imposed on first home buyers,” Tim Reardon from the Housing Industry Association said.
Craig Emerson from Emerson Economics added that the Bank of Mum and Dad has been around for decades, admittedly not for everyone, and it has never really been blamed for price increases.
A poll of nearly 2,500 Yahoo Finance readers found 22 per cent had asked their parents for money to buy a home, while 38 per cent said they had saved their deposit all on their own.
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A further 27 per cent said their parents couldn’t afford to pitch in, while 6 per cent said they would just wait for their inheritance to come through.
Mortgage broker David Pelligra told Yahoo Finance that homebuyers need to be aware of what the Bank of Mum and Dad does during the mortgage process.
In most cases, it won’t be able to push them into pricier suburbs, but it will get them into the market faster.
“If they’re giving a cash gift, that is essentially just counted as funds to be able to complete [the sale],” he said.
Getting $50,000 from mum and dad doesn’t see your pre-approval limit suddenly go from $1 million to $1.3 million, which would allow someone to to buy in a pricier suburb, or a bigger home.
It just gives them enough of a deposit to access the government’s 5 per cent deposit scheme, or have enough money for a lender to green light the mortgage.
Mortgage broker David Pelligra said the Bank of Mum and Dad can have big implications on your mortgage. (Source: Facebook/Getty)
Borrowing power will depend on how much income the applicant or applicants are pulling in each pay cycle and if they have any other debts or liabilities.
If the Bank of Mum and Dad isn’t a gift and is meant to be paid back over time, a person’s borrowing power could actually decrease because lenders would see that as an additional debt.
“Each bank has their own policy on how they would expense that out,” Pelligra explained.
“For instance, one particular bank has a Funds from Family form where you can tick either it’s a gift or you can tick whether it’s a repayable gift, and it actually gives the terms on what that repayable gift is.”
The spring selling season is one of the busiest parts of the real estate calendar.
But with three interest rate cuts on the board so far in 2025, the expansion of the 5 per cent deposit scheme in October, and a lack of new supply, the market has been in overdrive.
New data has revealed that this fresh rush has seen prices creep up in certain pockets of the country.
PropTrack’s monthly Home Price Index showed that property prices rose 0.6 per cent nationally in October.
This is the tenth consecutive month where prices went up, and equates to a $65,200 increase in the cost of a typical home over the past year.
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Darwin, Hobart, Sydney and Melbourne are seeing the biggest growth spurts in the last month, according to PropTrack.
Prices in Brisbane, Adelaide and Perth are also still going up, however their incredible leaps have become smaller.
Cotality’s monthly home values report for October has revealed which parts of the market were seeing the biggest gains.
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