If I had a dollar for every time someone said to me: “It’s different here; we didn’t have the dodgy lending practices that they had in America”, I reckon I would have a good $12 by now.
So what do you consider to be a conservative requirement for a deposit for a potential home owner? 10 per cent? 20 per cent?
Well, just last year, we had lenders who were asking for no deposit – not one cent – and on top of that, they handed out an extra 5 per cent spending money to fill the new house with furniture!!
“Next month, non-bank lender Mortgage House will offer a home loan equivalent to 105 per cent of the property's value - the most generous deal since the global financial crisis kicked in three years ago. The company also offers a 99 per cent loan-to-value ratio loan, which it launched last month, and says applications have been flooding in.”
While house prices are rising, this kind of reckless lending goes largely unnoticed. If the homeowner can no longer pay the mortgage, they simply sell their house for a profit and pay back their loan – everyone’s happy.
It’s when house prices start going down, and homeowners owe more than they own, that we’ll discover it’s not different here after all.
Comments and queries welcome.