A war erupts between boomers and millennials as children refuse to pay their parents back

A generational war is brewing between baby boomer parents and their millennial children as the Reserve Bank’s aggressive rate hikes spark legal disputes.

Unaffordable real estate means first home buyers are increasingly turning to the ‘Bank of Mum and Dad’ for help getting onto the property ladder.

In many cases, parents have lent money to their children.

But since the RBA’s 13 rate hikes began in May 2022, younger borrowers have found themselves unable to repay their parents and pay off their mortgages at the same time.

With Reserve Bank interest rates at a 12-year high of 4.35 per cent, family law specialist Will Stidston, managing director of Barry Nilsson, says parents are now resorting to legal action to repay the costs.

“Well-intentioned parents are dragged into the legal process to get back the money they provided to help their adult children enter the real estate market, only to see their children’s relationships dissolve,” he said.

Parents who had lent or gifted their children also experienced complications when their child separated from his spouse after purchasing a property together.

‘Many well-intentioned parents go into this blindly and then come to me when the relationship has broken down and are shocked to learn that the money may not be repaid under a standard loan agreement because family law courts can exercise their considerable discretion. Mr Stidson said.

‘With access to the property market difficult and interest rates continuing to rise, we expect more and more legal action in cases where the Bank of Mum and Dad has lent money to their children but those couples then split up.’

The average house price in Sydney has risen 12.5 per cent this year to an even more unaffordable $1.397 million, CoreLogic data shows, despite RBA rate hikes.

This means first-home buyers are turning to their parents for help to even buy a cheaper home, but they’re struggling with repayments.

An average income earner with a salary of $95,581 would barely get bank approval to borrow $573,486, or more than six times their salary.

But if they could get a mortgage, a 20 per cent deposit of $143,368 would be needed to buy a $716,841 house alone, which would buy a condo in Sydney or a suburban house in Melbourne.

No wonder they’re turning to their parents, with Jarden Australia estimating that parents injected $2.7 billion into the property market just to help their children.

A survey of 282 mortgage brokers found that younger borrowers received an average of $92,000 from their parents.

Carlos Cacho, Jarden’s chief economist, sent an email to clients last month describing unaffordable housing as a generational divide, where parental assistance determined a person’s wealth.

Unaffordable real estate means first home buyers are increasingly turning to the ‘Bank of Mum and Dad’ for help getting onto the property ladder (pictured is an auction in Sydney)

With Reserve Bank interest rates at a 12-year high of 4.35 per cent, family law specialist Will Stidston, managing director of Barry Nilsson, said parents are now resorting to legal action to repay debts.

“Home ownership is increasingly becoming a class divide in Australia as affordability, especially in Sydney, continues to deteriorate,” he said.

This means that first home buyers became ‘increasingly dependent on access to support from family and therefore increasingly influenced by family wealth and home ownership’.

When baby boomers entered the property market in the early 1980s, a median-priced home in Sydney and Melbourne cost less than four times the average full-time salary.

But the debt-to-income ratio in Sydney, even with a 20 per cent deposit, is now 12, meaning only a married couple earning a combined $186,000 can afford a loan.

In Melbourne, where the average house price is $943,725, the equivalent debt-to-income ratio is 7.9.