The ‘bank of mum and dad’ loan helping millennials get a foot in the door


Alex Ritchie

Alex Ritchie

( 3 min read )

Forget going guarantor, a new loan from WA based lender Bluebay Home Loans allows parents to loan their kids up to 20 per cent deposit on their first home, with the bank providing the rest. 

RateCity research previously found that half of Millennials need help from their parents to get into the property market. 

Bluebay’s Parent Assist Home Loan allows parents to provide their first home buyer child with a home loan deposit from 5 to 20 per cent, to be repaid with interest. 

While cash in hand is a generous gift from any helpful parent, this new loan type allows for a level of formality that helps to show the first home buyer as a reliable, and ideal borrower. 

How does this loan work? 

The Parent Assist Home Loan allows first home buyers to make interest-only repayments to their parents at half the rate of the Bluebay home loan rate. For nervous parents who want to help their child get a foot in the property market, but aren’t comfortable going guarantor or gifting the money, this could be a much easier option. 

The new homebuyer is also still able to access the First Home Owner’s Grant and any stamp duty concessions. 

According to BlueBay Home Loans:

“The fees are transparent with an ongoing management fee of only $5 per month.

And remember, things happen in life, whatever changes occur down the track, parents have official protection over their money.

Most importantly, a Parent Assist Home Loan removes the stress and emotion of borrowing money from a parent.” 

Solution or another piece of the housing affordability crisis puzzle? 

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RateCity research previously found that Gen Ys (born in the 80s to 00s) need three incomes to afford a home. Gen X (born in the 60s to 80s) needed two, and Baby Boomers were able to pay off their homes on just one income.

The Australian government has made housing affordability a key focus for the last few years, with increasing supply positioned as the great fix for Aussie housing affordability woes. 

For Sydney and Melbourne, the cities with the highest median house values, there has finally been a market slowdown. Experts believe this is not due to additional home building, but “a drop in demand” thanks to APRA banking regulations making it difficult to get a loan, as well as astronomical housing prices compared to wage growth and wage rates in these cities.

The emergence of more loans designed to help those under 35 get into the property market is a welcome move, and hopefully one that will pop up amongst lenders based outside of WA. 

However, it is still a sign that something is rotten in the state of the Aussie property market that this younger generation has been priced out and must rely on alternative methods to get in, compared to the previous generations. 

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