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LONDON: A new bank is set to service boomers who wish to lend to their children to facilitate home purchases.

The country’s “banks of mum and dad” will soon have a dedicated lender, with former Westpac chief Brian Hartzer and Bank of Queensland director Jenny Fagg reuniting to launch 2Be, which will help homeowners access equity to help their children buy their own property.

The non-bank lender expects to focus on those aged between 55 and 75, allowing them to borrow up to $500,000 to fund a deposit for houses for their children.

The launch of 2Be coincides with major parties focusing their federal election campaign efforts on housing affordability. On Sunday, Scott Morrison announced a package of measures that aim to liberate more housing stock by providing tax concessions to encourage older Australians to sell their existing homes.

The package also allows pensioners more time to restructure their assets following the sale of the family home – exempting the proceeds from the pension assets test for two years.

But a significant number of first home buyers will remain reliant on their parents to assist in saving for a deposit or for other financing to buy real estate.

One survey, released by Canstar in December, found 23 per cent of millennials felt parents had an obligation to help their children buy a first home. That figure was 16 per cent for baby boomers.

Dr Fagg told The Australian that banks tended to avoid lending to older Australians, a gap that 2Be would be able to fill.

“The major lenders generally don’t lend to people in this stage in their life that’s despite the value in their home,” Dr Fagg, a former ANZ executive and chief risk officer at AMP during a tumultuous period at the company, said.

“We’ve designed this business from the ground up to specifically home equity loans to help Boomers and help get their kids on the property ladder.” “Almost 45 per cent of wealth in Australia is held by the Baby Boomer segment. It’s a substantial market,” she added.

The loans will be come with a 5.95 per cent interest rate – although borrows will be given the option of capitalising annual interest or a 25 basis point cut if they make payments to the loan.

The decision to lend will be made based on assets and credit history rather than income.

Dr Fagg said the potential addressable market was substantial.

Dr Fagg said – given the target market – she expected “basically no” loan losses, with 2Be to lend against fully or near fully paid off properties worth more than $1m.

Borrowers must have homes worth $1m and hold another $500,000 in assets outside the home – shares, a holiday house or other investment property.

“We will work with each customer at the end of five years to work out if they are able to pay on the day or if there needs to be flexibility,” Dr Fagg said.

2Be, according to documents filed with the corporate regulator, is majority owned by Dr Fagg and Mr Hartzer, with smaller shareholders including Westpac’s former personal loans head Michael Sirmai and Rebecca Finkelstein, a partner at King & Wood Mallesons, as well as Beforepay chief executive James Twiss. Mr Hartzer is the chairman of Beforepay, a fintech payday lender which debuted on the ASX this year.

Dr Fagg – who is the company’s chief executive and worked with Mr Hartzer at ANZ – declined to reveal how 2Be would be funding its loan book.

“Over time they’re wanting to work with us to see if we can develop a further relationship but we will be developing new sources of funding over time,” she said.

2Be has partnered with a fintech lending platform to build a decision making engine to determine loan applications.

Despite its soft launch earlier this month, the lender has already received its first application.

Mr Hartzer said he was keen to work on another lending business with Dr Fagg as it serviced an obvious and unaddressed market.

“Jenny had been thinking about this issue of undocumented family lending for a number of years,” Mr Hartzer said.

“It’s very much about formalising and making it accessible for people who don’t have the cash sitting around.”