The traditional path to Australian homeownership has fundamentally shifted, as skyrocketing prices have transformed the Bank of Mum and Dad from an occasional source of assistance into the nation’s ninth-largest mortgage lender.
This financial powerhouse now extends beyond housing deposits to cover mortgage repayments and education costs, making parental support a structural necessity for the next generation. However, while this generosity is noble, the current volatile economic climate dictates that such support must be managed with a strategic approach to ensure your clients do not inadvertently compromise their own security.
Read more below:
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 your clients’ desire to help their 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 their 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, your clients risk sabotaging their financial security.
Before gifting to children or grandchildren, it is important that each client considers the long-term impact on their retirement savings, including their Age Pension eligibility. To help family without compromising their own future, clients must prioritise their retirement before assisting others. Otherwise, generosity today could become a burden on their lifestyle tomorrow.
Things to consider: -
Centrelink gifting rules
If your client receives a full or part pension, they will be subject to Centrelink’s gifting rules. If the client gifts more than $10,000 per year / $30,000 over a rolling five-year period, their pension can be jeopardised.
Breaching these limits results in the excess amount being treated as a ‘deprived asset’.
This means that even though your client no longer possesses the money they have gifted, Centrelink will continue to count it as part of their assets and apply deemed income to the amount for five years from the date of the gift. This could impact your client’s Centrelink entitlements.
Market volatility
When a client withdraws money from retirement savings during periods of market volatility, they risk locking in capital losses. In a stable market, investments have time to recover from temporary dips, but selling assets while prices are low means your client has fewer units left to benefit when the market eventually bounces back. Drawing on investments in a falling market means your client depletes 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 that your client looks 15 to 20 years down the track at their 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 a client gives away their liquid capital now, they may limit the choices available in the future.
To ensure the Bank of Mum and Dad doesn't lead to family friction or financial loss, clients should 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 the recipient’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 your client first, keeping the capital within the family.
Alternatively, your client may elect to act as guarantor for a child’s mortgage. However, this isn’t simply a character reference, it is a legal pledge with their own home as collateral for the child’s debt. While it may allow family members to enter the market with a smaller deposit, it effectively ties your client’s financial freedom to theirs. If the child misses their mortgage payments due to job loss or illness, the bank has the right to come to your client for the shortfall. In the worst-case scenario – one where the property is sold and doesn't cover the debt – your client’s own home could be at risk.
Being a guarantor can also limit your client’s own borrowing power. This could potentially prevent your client from being able to downsize or rightsize or take out a loan to meet their own needs. In such a situation, your client may have to wait until the child’s mortgage is significantly paid down and they are formally released from the agreement.
Using home equity to fund the Bank of Mum and Dad can be a powerful tool because it generally allows your client to provide a significant cash deposit without depleting their 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 your client is confident that their own retirement needs are secured by sufficient income and capital, Connective Reverse can be used to unlock the wealth in their home and convert it into a tax-free lump sum for a child’s deposit. Best of all, your client retains full home ownership and regular repayments are not required, meaning the client doesn't need to dip into their retirement income to service the debt.
Home equity enables your clients to provide a ‘living inheritance’ when their children or grandchildren need it most. Providing such a head start is a powerful legacy.
Connective Reverse is a brand under Connective Credit Services Pty Ltd ACN 143 651 496,
Australian Credit Licence 389328 (Connective). Connective is the distributor of Connective
Reverse products provided by Household Capital Pty Limited ACN 618 068 214, Australian
Credit Licence 545906, who is the servicer for the credit provider, Household Capital Services
Pty Limited ACN 625 860 764.
Digital Finance Analytics (DFA)
If you are speaking with clients about helping children or grandchildren into the property market, your Connective Lending Manager or Connective Reverse BDM can help you explore whether equity release may be the right fit.
