Guarantor loans are gaining traction across Australia as rising living costs and surging property prices push more homebuyers to seek financial backing from family.
"We call it the 'Bank of Mum and Dad,'" Kevin Wheatley, founder and managing director of Sydney-based brokerage Bayside Residential and Commercial Mortgages, told Australian Broker. "And a lot of parents are doing that to help the younger members of their family get into the housing market.
"It's very difficult for a young couple, especially if they've got a child or two, to meet the debt serviceability requirements on their own," he said.
Guarantor mortgage loans are structured so that a parent or relative pledges part of their own home’s equity – typically enough to cover the 20% deposit – as a security, while the borrower remains solely responsible for repaying the loan. For many, it’s the only way to break into the housing market without waiting years to save.
"It essentially means the first-time buyer doesn't need a deposit at all, because they're using the parents' money for the deposit," said Robert Sordillo, founder and managing director of Adelaide-based Significant Financial Solutions. "The borrower would use the equity that the family has to buy property. The borrower can afford the mortgage, but is just struggling to save the 20%, 10%, 5% deposit, whatever the minimum requirement is, depending on the circumstance. It's just taking too long to save and get into the markets they want. That's where the guarantor comes in, instead of waiting years to save for the deposit.
"But the catch to it is that they need to service the whole debt on their own," Sordillo said. "So step one, the borrower needs to be able to afford the mortgage. And if they can afford it, the next step is how do they raise the deposit for the purchase? That's where the family guarantor comes in."
While recent data specifically tracking guarantor loans is limited, home loan provider Aussie reported a 71% increase in guarantor loan settlements between 2015 and 2021. More broadly, the Australian Bureau of Statistics (ABS) recorded a 6% year-on-year rise in overall housing loan commitments from March 2024 to March 2025.
For now, most insights into guarantor loan trends remain anecdotal. In fact, brokers nationwide are reporting an uptick in guarantor mortgage loans, driven by Australia’s ongoing cost-of-living crisis, escalating property prices, a persistent housing shortage and rising rents that make it increasingly difficult for many to save a standard deposit.
Queensland-based mortgage broker Luke Ashby of Emerge Finance, said he's written more guarantor loans in the last 12 months than he has in the last four years.
"It's a good solution," he said. “It’s for those who have a small deposit, but have a good income to pay the loan back."
Sordillo added that guarantor loans currently account for the highest proportion of first-time home buyer activity at his firm. He explained that the bank takes a “limited guarantee” over the parent’s home – just enough to cover the deposit – while the remainder of the loan is secured against the new property. Crucially, borrowers must still meet strict serviceability criteria, proving they can repay the full loan on their own.
With cost-of-living pressures showing no sign of easing, and property values continuing to climb in many markets, guarantor loans appear poised to remain a critical bridge for buyers – and a growing opportunity for savvy brokers.
New South Wales-based broker Ryan Ewart of Mortgage Choice said guarantor loans can offer several advantages, including slightly lower interest rates, as the guarantor eliminates the need for mortgage insurance. This removal can save borrowers thousands of dollars in premiums.
In addition, brokers should note that lenders typically prefer guarantors to be close family members – such as parents, siblings, or grandparents – who are financially secure and ideally hold property or other significant assets.
