First-home borrowers still looking for no-deposit home loans
Potential first-time buyers – some as investors while they rent – continue to seek 100% no-deposit home loans even though banks no longer offer them.
Dean Rushton, chief operating officer of mortgage broker Loan Market says 7% of the brokerage's total enquiries during October 2011 had come from people wanting no-deposit home loans.
"There remains strong interest from people who want to enter the real estate market and borrow the entire cost of the property," Rushton notes.
"But the modern-day lending reality is that if you want to obtain housing finance you have to save for a deposit.”
In late 2008 at the onset of the global financial crisis homebuyers began to find it hard to get no-deposit loans from banks such as the Commonwealth Bank of Australia.
At the time the JP Morgan banking analyst Brian Johnson suggested stricter lending standards were here to stay.
"The era of getting very easy credit to buy a house is over," he suggested.
Aussie Home Loans boss John Symond was prompted to suggest the tightening signalled a return to sensible lending practices.
"Banks have got to have prudent lending," he suggested in 2008.
"People buying home in Australia with little or no deposit is a flawed process.”
Rushton suggests lending restrictions requiring genuine savings contributions of around 5% towards the property purchase demonstrates to the lender that you have the capacity to save money and budget.
He suggests would-be buyers are best off to develop a savings plan early to build a home deposit.
"Borrowers should consider saving for as large a deposit as possible as both interest and lenders mortgage insurance costs increase substantially the more you borrow," he says.
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