Elder abuse risk in loans
Would you lend your children/grandchildren money to buy a house?
We asked people on the streets of Blenheim if they would consider helping their children financially when it came to buying a house.
Age Concern is worried the Reserve Bank's new mortgage lending rules will lead to increased financial abuse of the elderly.
The rules, effective from Tuesday, force banks to limit their mortgages with loan-to-value ratios of more than 80 per cent, to no more than 10 per cent of their new lending.
Elder abuse and neglect prevention national adviser Louise Collins said family members trying to raise a mortgage deposit could put increased pressure on parents and grandparents for help.
"It's only natural for parents to want to help their kids, or for grandparents to want to help out their grandkids, but doing so in this way could be very risky.
"Things don't always work out and older people in or nearing retirement must realise they may not get their money back if things go really bad."
People should seek advice before entering into a financial agreement, to prevent conflict and distress within the family if it did not work out, she said.
"If you do decide to lend money, make sure it's documented and also realise that you just might not get that money back."
Financial abuse was second to psychological abuse as the most common type of abuse suffered by the elderly in New Zealand. Most cases go unreported because older people often felt too embarrassed to report their own family to the police, she said.
Gascoigne Wicks partner Alison Weaver said the number of parents lending money would probably increase, but she warned parents should carefully consider the implications first.
"Kids might think their parents have heaps of money if they've got $100,000 sitting in the bank," she said. "But they need to realise if their parents are 70, their earning potential has diminished, and if their pension is not covering costs, they could be relying on that money - people live for a long time these days."
It was still unclear what banks would require under the new rules, she said. They could require a parental contribution to be a gift, which would make any payment irrevocable.
Labour Party leader David Cunliffe said people in Marlborough were facing lending restrictions to cool the housing market in Auckland.
- The Marlborough Express