How the 'Bank of Mum and Dad' is supporting a new generation of homebuyers

For decades, the great Australian dream was built on a simple foundation: work hard, save a deposit and buy a home. However, that foundation has shifted.

With the average deposit in major cities now often exceeding $120,000, the path to homeownership for the next generation is challenging. Enter the Bank of Mum and Dad, a quiet financial powerhouse that has evolved from an occasional helping hand to a structural necessity of the Australian property market. Such a powerhouse in fact, that the Bank of Mum and Dad is now considered to be the ninth largest mortgage lender in the country.

The Bank of Mum and Dad funds more than first home deposits. Parents (and grandparents) are often stumping up to help pay out a mortgage or invest in an education. However, while helping your children secure their future is a noble goal, doing so in today’s volatile economic climate requires more than generosity. It requires a strategic approach that protects your own hard-earned retirement.

The desire to help is nearly universal – Aware Super research recently revealed that 98 percent of parents and 96 percent of grandparents are open to providing financial support. And, as the Reserve Bank’s interest rate hikes widen the affordability gap for younger buyers, an increasing number of parents and grandparents are stepping in. However, good intentions can carry hidden risks and without a clear plan, you risk sabotaging your own financial security.

Before gifting to children or grandchildren, it is important to consider the long-term impact on your retirement savings, including Age Pension eligibility. To help your family without compromising your future, you must prioritise your retirement before assisting others to ensure your generosity today doesn't become a burden on your lifestyle tomorrow.

Things to consider:

Centrelink gifting rules

If you receive a full or part pension, you’ll be subject to Centerlink’s gifting rules. If you gift more than $10,000 per year / $30,000 over a rolling five-year period, your pension can be jeopardised. 

Breaching these limits results in the excess amount being treated as a ‘deprived asset’.

This means that even though you no longer possess the money you have gifted, Centrelink will continue to count it as part of your assets and apply deemed income to the amount for five years from the date of the gift. This could impact your Centrelink entitlements.

Market volatility

When you withdraw money from your retirement savings during periods of market volatility, you risk locking in capital losses. In a stable market, your investments have time to recover from temporary dips, but selling assets while prices are low means you have fewer units left to benefit when the market eventually bounces back. Drawing on investments in a falling market means you deplete your invested capital more quickly.

Aged care planning

While helping a child or grandchild secure a home or complete their education might feel like a priority today, it is essential to look 15 to 20 years down the track at your own potential needs. The cost of quality aged care can be significant, and the Bank of Mum and Dad is often funded by the very capital intended to cover these final life stages.

Consider for example the Refundable Accommodation Deposit (RAD) charged by residential aged care facilities. In 2026, RADs frequently range from $500,000 to over one million dollars in metropolitan areas. If you give away your liquid capital now, you may limit the choices available to you in the future.

To ensure the Bank of Mum and Dad doesn't lead to family friction or financial loss, you need to treat the transaction with the same professional rigour as a retail bank might. In the eyes of the law, ‘handshake deals’ made with love generally don’t stand up to scrutiny if circumstances change.

Most parents and grandparents instinctively want to ‘gift’ money to simplify the mortgage application for their children. However, a formal Loan Agreement is often a safer strategic move.

For example, should your child’s marriage or de facto relationship break down, a gift is generally considered part of the couple’s joint asset pool and subject to a 50/50 split. A loan backed by a formal agreement, however, is a liability that must be repaid to you first, keeping the capital within the family.

You may choose to act as guarantor for a child’s mortgage. When you do this, you aren't just giving a character reference; you are legally pledging your own home as collateral for your child’s debt. While it allows them to enter the market with a smaller deposit, it effectively ties your financial freedom to theirs. If your child misses their mortgage payments due to job loss or illness, the bank has the right to come to you for the shortfall. In the worst-case scenario – one where the property is sold and doesn't cover the debt – your own home could be at risk.

Being a guarantor can also limit your own borrowing power; potentially preventing you from downsizing or rightsizing, or taking out a loan to meet your own needs. This might have to wait until your child’s mortgage is significantly paid down and you are formally released from the agreement.

Using your home equity to fund the Bank of Mum and Dad can be a powerful tool because it generally allows you to provide a significant cash deposit without depleting your hard-earned retirement savings. As noted earlier, that’s especially important during periods of market volatility.

Most Australian homeowners over 60 have seen their property values grow substantially over the decades. If you're confident that your own retirement needs are secured by sufficient income and capital, you could use a reverse mortgage to unlock the wealth in your home and convert it into a tax-free lump sum for your child’s deposit or education. Best of all, you retain full home ownership and regular repayments are not required, meaning you don't need to dip into your retirement income to service the debt.

Your home equity can enable you to provide a ‘living inheritance’ when your children or grandchildren need it most. Providing a head start is a powerful legacy and the greatest return on investment is the joy of witnessing your financial success transform your family's future.

Applications for credit are subject to eligibility and lending criteria. Fees and charges are payable, and terms and conditions apply (available upon request). Household Capital Pty Limited ACN 618 068 214, Australian Credit Licence 545906, is the Servicer for the credit provider Household Capital Services Pty Limited ACN 625 860 764.