December newsletter
'Computer says no' to one-third of new buyers
Posted on Tuesday, November 24 2009 at 10:00 AM
One in three first-time homebuyers are being refused finance, according to Loan Market Group, which is warning intending buyers to be well prepared when they seek approval.
Loan Market Group chief operating officer Dean Rushton says tighter lending rules that require genuine savings contributions of five per cent and upwards towards the property purchase are creating major hurdles for new buyers.
Other loan applicants who pass all the lending criteria are being rejected because they have few assets, Rushton adds.
"The major lenders are in a competitive position where they can pick and choose who they want to lend money to and there's little room to move for applicants who don't fit the box," he says.
"We're finding that 30 per cent of first-time buyers who enquire about housing finance won't even get past first base.
"Just like the sketch on the comedy series Little Britain, if the computer says 'no' the lenders are simply not interested."
Rushton says family equity options are still available to help first homebuyers enter the residential real estate market with help from their parents or other family members.
"The most popular of the family equity options is the limited liability guarantor and there has been an increase in enquiries for this since some of the major banks reduced their LVRs (loan-to-value ratios) to 90 per cent.
"But all parties do need to be aware that in the case of a default, the family members are liable for the percentage they secure.
"If you're in the first homebuyer category then you should plan ahead and talk to a mortgage broker in advance to understand your position before you target your property price range."
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