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No More No Deposit Home Loans
No deposit home loans for now are going to be a thing of the past, or at the very least it will become increasingly difficult for prospective home to secure funding on a no deposit basis, if not outright impossible.
The global credit crisis has put a microscope under retail and traditional bank lending practices and products. Banks who in the past in their thirst for market share and increased profits coupled with an era of cheap credit often waived prudent lending practices of requiring borrowers to stump up down payments for the homes they buy.
Aussie Home Loans boss John Symond says the change signals a return to sensible lending practices, and told ABC Radio in an interview “Banks have got to have prudent lending People buying home in Australia with little or no deposit is flawed process.”
No Money Free Honey
Last month some lenders came in for heavy doses of criticism, when they began marketing campaigns aimed at first home buyers urging them to use their grant as their deposit immediately after the government increased the first home owners grant, mortgage lender RAMS began taking full page advertisements titled “No Deposit? No Worries”
As part of a fiscal stimulus package, designed to support the property market the Government increased the first home owners grant to $14,000 for established homes and $21,000 for new houses.
Consumer advocacy were incandescent by the marketing strategy. The advertising campaign by RAMS in mid October was labelled purely irresponsible by the Consumer Credit Legal Centre principal solicitor Katherine Lane .
Miss Lane told the Daily Telegraph back in October that mortgage lenders should be erring on the side of caution instead of preying on prospective home owners who have no savings. ” I think this is the worst case of denial that I’ve ever seen,” she said.
“The bottom line is, there needs to be care taken at the moment given the current situation, and just because you get an extra lot of money doesn’t mean you don’t need to take care and ensure you can afford the loan. Unfortunately, lenders do irresponsible stuff like this all the time.”
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