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MP suggests 'no deposit' mortgages for reliable renters

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Australian Broker | 22 Feb 2017, 08:25 AM Agree 0
The proposal would see banks waive the traditional mortgage deposit for first home buyers with a strong rental history
  • Oak Laurel | 22 Feb 2017, 09:28 AM Agree 0
    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?
  • Simon | 22 Feb 2017, 09:34 AM Agree 0
    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.
  • Bruce Mawson | 22 Feb 2017, 11:14 AM Agree 0
    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.
  • Layla | 22 Feb 2017, 11:32 AM Agree 0
    I pray for the day this will happen!!! The only way my husband and I will get a deposit if if someone passes away.... Its horrible to have to think like that but its true... Weve been renting for 6 years but it would be nice to call a place our own.....
  • Lulu | 22 Feb 2017, 03:26 PM Agree 0
    Our family moved to Australia almost 9 years ago and have been renting ever since. Having to still make ends meet every day on top of paying the rent and all other expenses, there really is no way that we would ever be able to put money aside for a deposit on our own home. I can appreciate that we want to ensure that banks remain strong but if strict criteria is set in place for those applying or a 100% home loan, then really, there should be no issues or at least a very small margin of risk. Surely, my 9 years of clean renting record could be considered to be proof enough for any bank that I am in it for the long haul. I was even able to pay my rent during 3 occasions that my husband was made redundant. My husband and I have owned 5 houses (not all at the same time) in our country of birth and have acquired 100% home loans on each of these houses. Never have I defaulted on these loans or ran away from our responsibilities. A house is an investment and one that I would have hoped we could have by the time we retire to add to our little nest egg. If no bank will try the avenue of no deposit home loans, we will become a huge burden on taxpayers by the time we do enter retirement because we've had to start from scratch at the age of 37, now 46, trying to save up for our superannuation which are very low and will never be able to compete with the investment that we could have gotten had we owned our own home.

    I really hope and pray that a bank out there will see the opportunity in this and make home owning a reality to so many older people out there. I keep hearing about the young people not being able to enter the market, but society has forgotten about so many parents and older folk in their 40s and over that will never be able to make home owning in Australia a reality due to over inflated house prices and the requirement of a large deposit.
    • that guy | 23 Feb 2017, 05:36 PM Agree 0
      the comment at the end.... not thought complaint about inflated house prices is ironic to me as doing 100% lending would cause exactly that.... if purchasing a home is easier.... more people buy... if more people buy... there is higher demand.... higher demand = higher price.....
      also... what do you consider a "large deposit"...?
  • Chris | 23 Feb 2017, 10:07 AM Agree 0
    hahahahaHaHaHaHaHaHAHAHAHAH ..... never laughed so long and so loud ....... politicians who don't have a clue what they are talking about and they just keep coming.
  • Papery | 23 Feb 2017, 11:20 AM Agree 0
    The Big End Of Town will never support a scheme that gets in the way of the property investment gravy train.
    Keep the masses renting.
    Lets make sure that every level of business & government can continue to exploit the basic right of an affordable roof over our heads.

  • Mortgage Broker | 23 Feb 2017, 11:35 AM Agree 0
    First Home Owners can borrow up to 98% now which is 95% Non-Genuine Savings (using rental record), plus Loan Mortgage Insurance. With the Queensland First Home Owners Grant of $20,000 (for new or to construct until 30th June 2017) it works (with the right priced property). With Older Properties, there is no Grant. If the Bank agree to lend 100%, it would come unstuck with the Loan Mortgage Insurance, conveyancing and OSR fees. Banks would have to Cap those fees on top of the 100% Lend or a First Home Owners Boost that covers all fees and charges would have to come into play.
  • Broker | 23 Feb 2017, 05:33 PM Agree 0
    I had to give my self an instant Face-palm upon hearing this "suggestion" on the local Radio station last week (I'm from the region this MP is from). And just thought to myself how bad our pollies are.... poorly informed and clearly uneducated in the industry as a whole....
    He's thinking about an isolated fix to a problem.... but not factoring in the potential issue that could result from such a policy....
    before i get too far into it.... let me just say.... if i was only thinking about myself.... then i could easily say, yeh this is a great idea! it would allow me as a broker to write more loans.... just.....
    We already have multiple lenders that allow buyers to borrow at 95% Mortgage insurance, some.... dont require the deposit to be genuine savings at all.... some, dont require the deposit to be genuine savings provided we can evident a strong rental history, some obviously just flat out want to see genuine savings at the LVR.... the other thing is.... clients can still borrow up to 110% with Guarantors, now i know, this change would mean less need for guarantors, but then if the new FHO's do happen to default, who generally helps them out..? the family that would have otherwise guaranteed their mortgage anyway....
    another issue is.... i have already noticed people getting excited about this, but the way things are written in the media is all wrong, the media makes it sound like FHO's cant afford to buy because banks need 20%... WRONG..... they then also talk about 100% lending.... but, then what about the costs (stamp duty, reg, transfer, conveyancer, rates adjustments)? they never talk about the additional costs.... so then we have people thinking... "i dont need money to buy, i can borrow 100%"..... but you do.... you still need to pay costs? this creates a false belief of how the system works... instead they should probably talk to a professional in the industry instead of an MP with no idea or just reading main stream media.....
    further more to these costs..... lets face it... no main stream lender especially, or mortgage insurer is going to be keen on the idea, so for it to become a thing it would need to be something that the government pushed i think.... so then if the government pushes relaxed lending rules, creating higher risk.... will the still offer the concessions on stamp duty or grants available to stamp duty.... or stop those...?
    next.... housing problem.... Andrew broad thinks allowing relaxing lending policy for first home buyers will fix the housing problem? WRONG.... it will more likely create a DIFFERENT problem.... leading towards a market crash... basically.... if its easier to buy property, more people are buying.... if more people are buying, prices are rising (its not just investment buyers that push prices up.. everyone does)... if pricing is rising... debts are rising.... factoring in.... house price growth rates, vs average incomes / income growth rates, inflation rates etc.... basically they will just create another problem where owning a home is easier to achieve... at least for the start.... but will become harder to afford... surplus household income will reduce, making living tighter... banks will also see higher risk, so charge higher rates... another thing creating even less surplus household income...... now lets add in the fact that already there has been an increase in prime mortgage defaults recently even with the stricter criteria and low rates..... they'll push it too far... increase house prices, increase debts, increase risk, increase household costs faster than the incomes will increase... people will default... repossessions increase, rate increase due to further risk again and on and on until the create another market crash / financial crisis.... may be an extreme scenario.... but its realistic.... at least if they do this crap without thinking it all through....
    i think the people that think this is a good idea are only viewing this based on a personal benefit to either them or a friend / family member.... not actually thinking about the potential negative impacts...

    well.... there's my rant for the day!
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