“There’s a perception that first home buyers won’t be able to cope with it”
The Reserve Bank reinstated its LVR restrictions on lenders in March, though banks were already extremely reluctant to offer mortgages at a higher than 80% LVR - something one mortgage adviser said needs to be revisited, possibly in a conversation between the banks and the government.
Sarah Curtis Mortgages owner Sarah Curtis said that the cautiousness of banks around lending at higher LVRs may be higher than necessary, particularly with the rigorous checks and high standards it has in place when assessing every potential loan.
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She said that ‘unaffordable loans’ are very unlikely to be offered as a result, and so banks should consider giving first home buyers a leg up and taking on more high-LVR loans while maintaining responsible lending.
“The is no one thing that is going to fix the housing market, but the government is going to need to have a conversation with the banks about potentially helping first home buyers to borrow at a higher LVR,” Curtis commented.
“There’s a large perception that everyone who is getting a mortgage on their first home is going to be lent so much money, and they won’t be able to cope with it. But we know that with all the hoops that the banks have set up which people have to jump through, there’s no way that they can be lending to people who can’t afford it. Taking on more of those loans would certainly be helpful to the first home buyer market.”
“The latest round of changes isn’t going to help,” she added.
“The problem we’re going to have now is that rents are likely to go up, and so first home buyers will have to cut the amount that they’re able to save each week or each month.”
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Curtis said that saving is likely to become more difficult for first home buyers from now on, particularly with landlords potentially looking to recoup some of their new tax obligations.
“And if you do have cash sitting in the bank, there’s also no incentive for you to put that into term deposits or any of the alternatives that we used to have either, because the interest rates are so low,” she said.
“With saving getting more and more difficult and banks unwilling to lend at higher than 80% LVR, that’s definitely going to make it tough for first home buyers.”
