One in every two to three first-home buyers could be shut out of the housing market as the Reserve Bank forges ahead with controversial restrictions on home loans. Banking sources say the central bank will announce new rules within the week that will rein in riskier mortgage lending to 12 per cent of new loans.
The changes will dramatically reduce the amount of high loan-to-value (LVR) loans that the banks are writing, making it much harder to get a mortgage with a deposit of less than 20 per cent. In theory, the new regime could strip close to $2 billion out of the loan market in a year, equal to more than 4000 homes at average prices.
I say let’s ask ourselves the following questions:
- Is it so bad if the lending criteria are tightened?
- Have we become accustomed to purchasing property with skimpy deposits?
- In this material age have we lost sight of “no pain, no gain”?
- Is living with debt the accepted thing?
Call me old school, conservative or irrelevant but I fully support the reining in of “high risk/low equity” lending. What was wrong with the old days when a minimum deposit of 20% was required? And yes we worked, scraped and saved to get it but somehow we used to do it.
Yes, sure it is going to hurt by raising the bar of lending, but wherever a new level is set it will always be too high for some. Once established, the rules become the new accepted norm and form the baseline for what is acceptable. Look at what the no tolerance drink driving rules has done for our teens. It has brought back some good old black and white rules and I think the new lending criteria will do the same in the long run.
If you really want something bad enough, you will always find a way of getting it.