Regulation to hit first-time buyers
By
Ben Abbott
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20/07/2010 6:00:00 AM
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3
comments
The advent of responsible lending regulations may impinge the ability of first home buyers to enter the market, at the same time as affordability problems continue to increase.
The new National Consumer Credit regime's responsible lending guidelines require lenders and brokers to focus increasingly on servicibility, or the ability for borrowers to repay.
FAST managing director Steve Kane said while most lending applications had previously focused on static data, "the focus under responsibly lending is to ensure that the customer can afford the debt going forward as much as what their historical data says."
Speaking with Broker News TV, Kane said as a result, regulation will put a continued amount of pressure on affordability in the marketplace. He said the increasing level of deposits required, particualrly in Sydney and New South Wales, would also make it difficult.
James Austin, Firstmac's chief financial officer, said recent rate increases make first home buyers "the most vulnerable" players in the market, though investors are coming in to replace them. He said stress for first home buyers will come as a result of high loan to value ratios.
Lisa Montgomery, head of marketing and consumer advocacy at Resi, said the problem of affordability may result in product innovation over the next 12 months among lenders, particulary in the area of shared equity loans, which are now "more significant on the radar". "They've been around since 2002/03, but no one has really done it well," she said.
Kane said this is indicative of an "intergenerational effect", as baby boomers begin to cede their property wealth to their children, who are entering the market as first home buyers.
He said the equity that the baby boomers have built up will start to be used less for pure investment, and more often in helping their families get into the property market.
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Latest Comments
Total:
3
comment(s)
Phil Johns on
21 Jul 2010 10:03 AM
Just wait until Comprehensive Credit reporting is up and running 2012 and the consumers cannot hide their real debt levels. That is when there will be a true restriction of credit for years as consumers a forced to pay down debt levels before they can be approved for a ''responsible loan''.
Tony on
05 Aug 2010 04:14 PM
Interesting this new legislation and responsible lending. What will happen if I am interviewing a young couple for 1st home purchase and deem that, in my opinion, they are not going to be able to afford the new loan based on the fact I believe they will have a baby in the next couple of yrs. and will only have i income and I also believe rates will be higher by then. Gee, how many 1st home borrowers/buyers will there be left????????????????????
Decimus on
19 Aug 2010 02:22 PM
Solutions suggested:
Ban the purchase of domestic housing property by anyone other than Australian residents
Cancel the first home buyers gift
Reduce migration to replacement levels only say 50-100,000
These measures should see a rapid 20% reduction in prices.