‘On the hook’: Falling home values threaten a huge source of Aussie home loans

Property prices have been falling across every capital and are expected to continue falling into 2027. Picture: Sam Ruttyn Australia’s plummeting home prices are threatening to bury the country’s fifth largest lender: the bank of mum and dad. New figures have revealed a 10 per cent national fall in home prices, currently forecast by ANZ, would leave the typical bank of mum and dad loan guarantor on the hook for many more years than planned. These are loans where parents or family members use the equity in their own homes as security for their child’s mortgage – usually for the purpose of helping their children buy sooner with a better rate. Guarantors are typically released once the borrower’s loan falls to 80 per cent of the property’s value – a tipping point that could take years longer to reach in a downturn. HomeLoanRates.com.au modelling of ANZ’s price forecasts using ABS and RBA data showed mounting risk for parents who helped their kids buy homes. Those who guaranteed 10 per cent of a $799,000 mortgage, the average owner occupier loan, would have to wait 11 years for their kids’ equity position to grow enough to untether the loan obligation. That’s assuming prices dropped by...