Login
ISCOVER
Three in five Australians planning to purchase their first home in the next couple of years are considering having a family member act as guarantor, according to a new report.
Financial wellbeing start-up Humbli surveyed more than 1,600 Australians and found that the majority of consumers who have gone through the home loan experience are willing to assist family members in their property purchase pursuit, either through cash loans, gifts, or acting as a guarantor.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
“The odds are really stacked against borrowers especially first home buyers and it’s no surprise they are turning to family members for assistance,” Humbli chief executive Damien Farrell said.
“It’s an incredible way to support a loved one as long as everyone understands what they’re getting into.”
Although family members are willing to act as guarantors, Humbli’s research indicated that they have significant concerns about the risks and financial implications, with the top concern being: fear of financial property loss if things go wrong (39 per cent); followed by compromising their own security/retirement income (36 per cent); not being able to assist family as much as they want to (31 per cent); and no recourse if things go wrong (31 per cent).
Humbli’s research indicated that there is strong appeal for loan features that aim to protect guarantors, with the top three being: releasing guarantors from their commitments as soon as possible (78 per cent); education for guarantors prior to committing to the loan (78 per cent); and real-time notifications to guarantors of any adverse repayment activity (77 per cent).
Notably, of the existing and potential guarantors surveyed, 71 per cent agreed that having loan features such as these in place would help protect the borrower-guarantor relationship. Three-quarters (75 per cent) also agreed that having a lender that provides a knowledge-building platform to educate home buyers and guarantors held strong appeal.
“The Banking Code obligations are a crucial measure to ensure guarantors understand the risk involved when providing a guarantee. And lenders are now faced with a follow-up inquiry on whether they’ve improved their practices and are complying with the guarantor obligations,” Mr Farrell said.
“It’s clear that borrowers and guarantors are hungry for solutions which aim to put real safeguards in place. This represents a fantastic opportunity for lenders to innovate their approach and provide a safer and more transparent customer experience while upholding a higher standard.”
Higher interest rates and tighter serviceability requirements have led to a drop in first home buyer activity in recent months. The AFG Mortgage Index for the second quarter of the financial year 2023 (2Q23) found just 11 per cent of all loans lodged by the AFG broker network were for FHBs.
The figure marked a fall of 2 percentage points on the same period last year and is down from 12 per cent on 1Q23.
[Related: Regional FHBs come out in droves for government scheme]
JOIN THE DISCUSSION