Of course, if this type of intergenerational assistance does become more common, then fewer parents will be able to use the capital gains that they have benefited from to boost their own consumption. Instead, in effect, they will be using those capital gains to support the following generations with their higher housing costs.
Although the risk that a home mortgage borrower may default is small for any individual mortgage, risks can be substantial for a financial institution holding a large volume of mortgages for homes concentrated in one area or a few areas of the country.