MP suggests 'no deposit' mortgages for reliable renters

by Miklos Bolza22 Feb 2017
Nationals MP Andrew Broad has suggested that banks waive deposit requirements from first home buyers with a positive three-year rental history.

If mortgage repayments equal what the individual is paying each month in rent, that should be enough evidence to let them borrow 100% of the loan, he told News.com.au.

“The idea came from a discussion I had with a single mum in Mildura. She has two kids and she applied for nearly 100 houses to rent and couldn’t find a place. She could have bought for the same money as renting but couldn’t save a deposit. But she told me she had been a perfect renter for years.”

It should be in the country’s best interest to ensure that people like this can reach the goal of home ownership, he said, adding that the proposal had already received a “tremendous” reaction from the public and was welcomed by those who weren’t even first home buyers themselves.

“A couple in their 70s contacted my office and said they were able to buy a house and buy a house with this sort of product – in the old days you could buy a house with a 100% mortgage. They were concerned about their grandchildren not being able to have the same standard of living as they had. It is a big issue out there.”

However, while this type of mortgage could help first home buyers overcome the hurdle of having to save for a deposit, chief executive of Mortgage Choice, John Flavell, said it could be too risky for the financial system.

“I understand that one of the biggest hurdles facing first home buyers is saving the deposit. That said, if Australia’s banks were to offer 100% home loans once again, they would be exposing themselves to a high level of risk,” he told News.com.au.

“In Australia, we need our banks to be strong and safe.”

Related stories:

The changing face of first home buyers

Young homebuyers seeking wider alternatives

FHBs increasingly locked out of property

COMMENTS

  • by Oak Laurel 22/02/2017 9:28:14 AM

    I wonder if he is willing to pick up the tab if it all turns bad and there is a loss on the repossession sale?

  • by Simon 22/02/2017 9:34:08 AM

    A wonderful concept, specifically aimed at helping housing affordability for the most vulnerable.

    Especially of value in Tasmania and some rural areas of Australia, where Rent > Repayment is the norm.

    Unfortunately it would require significant change to lender and LMI policies to implement and is more likely to fall to an alternate lending provider, who can counter-balance the additional risk of high LVR, perhaps with a higher interest rate or fees than otherwise available in order to remain commercially viable.

    I remain hopeful, but doubt we will see any implementation or introduction.

  • by Bruce Mawson 22/02/2017 11:14:27 AM

    As any Mortgage Insurer will tell you, the "less skin in the game, the greater the risk". There is no doubt there are many people paying more rent than their ownership costs may be. Unfortunately the no deposit theory, also recently espoused by Qld Treasurer, has been tried in the US, to stimulate construction and Home Ownership.

    The construction boost was achieved, but the suburbs of vacant homes were a legacy of the no skin in the game, and walk away home owners.

    Of course "no recourse mortgages " were also a contributor.

    I think the concept has some merit, they used to be Housing Commission loans.