The ‘Bank of Mum and Dad’ at risk of financial abuse

The Bank of Mum and Dad has become so large as a home loan enabler that the Productivity Commission says if it was an actual bank it would be somewhere between the fifth and ninth biggest mortgage lender.

While not all home loan assistance from parents is in the form of gifts, the Productivity Commission says the number of children receiving them from parents has doubled in the past 20 years.

Although this is helping young Australians get into the housing market (perhaps at the expense of pushing up housing prices), it is far from clear whether such financial assistance works well for the parents providing the support.

Financial elder abuse is the third most common form of elder abuse in Australia. The perpetrators of elder abuse are most likely to be adult children, with sons more likely to commit financial elder abuse than daughters.

Yet mortgage brokers, financial advisers and even government officials appear to be encouraging older people to provide financial help to adult children wanting to buy homes without considering whether there might be consequences for the parents.