Deluge of lenders offer tax-payer backed sub-prime mortgages

Vai The Advisor:

Twenty-six additional lenders have been appointed to the initial panel of the government’s First Home Loan Deposit Scheme, including major bank, Commonwealth Bank.

The National Housing Finance and Investment Corporation (NHFIC) has announced its full panel of lenders taking part in the federal government’s First Home Loan Deposit Scheme (FHLDS).

Following on from the announcement that NAB had been chosen as the first major lender for the panel, CBA has been named as the second major bank to offer loans under the scheme, along with 25 non-major lenders.

The participating lenders will have the ability to write loans for first-home buyers (FHBs) who have saved deposits as little as 5 percent, with the government set to guarantee the rest of the deposit under the FHLDS.

CBA and NAB will reportedly be able to issue up to 50 per cent of the 10,000 annual guaranteed loans provided per financial year, according to the NHFIC Investment Mandate.

The two major banks will be accepting applications for the scheme from 1 January 2020.

The other 50 per cent of guaranteed loans will be written by the other non-major lenders on the NHFIC lending panel.

The non-majors will be taking applications from 1 February 2020.

The full list of lenders on the panel, along with NAB and CBA, are as follows:

  • Australian Military Bank
  • Auswide Bank
  • Bank Australia
  • Bank First
  • Bank of us
  • Bendigo Bank
  • Beyond Bank Australia
  • Community First Credit Union
  • CUA
  • Defence Bank
  • Gateway Bank
  • G&C Mutual Bank
  • Indigenous Business Australia
  • Mortgageport
  • MyState Bank
  • People’s Choice Credit Union
  • Police Bank (including the Border Bank and Bank of Heritage Isle)
  • P&N Bank
  • QBANK
  • Queensland Country Credit Union
  • Regional Australia Bank
  • Sydney Mutual Bank and Endeavour Mutual Bank (divisions of Australian Mutual Bank Ltd)
  • Teachers Mutual Bank Limited (including Firefighters Mutual Bank, Health Professionals Bank, Teachers Mutual Bank and UniBank)
  • The Mutual Bank
  • WAW Credit Union

Ten years after government-backed, sub-pime mortgages triggered Global Financial Crisis and here we are.

David Llewellyn-Smith
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Comments

      • The Traveling Wilbur

        I think you have been entirely too self-restrained…

        Though it did occur to me that some of the comments further down along the lines of ‘we are nearly there now, this is the last roll of some desparate dice’ were just baiting. I mean, no one could be that unobservant after all this time, surely?

  1. Why are tax payers on the hook for this again?

    These criminals will do anything to keep the bubble going.

      • proofreadersMEMBER

        How sh.t is that?

        Bank of Mum and Dad, apparently the 5th biggest home purchase lender in Straya, didn’t get a look in.

        Reason? Not a registered ADI and therefore, not pre-screened to be able to assess credit risk?

        • Actually,
          Reason. Because government is now in direct competition with bank of mum and dad to help out with deposits.

  2. This is why Australian property prices will always go up and never crash. The government and RBA will do everything they can to keep prices high and rising.
    Betting against property is a widow-maker trade.

  3. GunnamattaMEMBER

    You’d be able to get a good load of gloves at ChemistWarehouse too, and possibly even one of those buttock spreading devices and a good set of lube trowels to make sure you get that lube with a nice smooth finish.

    Come to think of it you would probably be able to get some pretty handy psychotropics to go with your mortgage at ChemistWarehouse

    ChemistWarehouse is a seriously good idea

  4. Can I get a split loan, where I borrow the full value of this scheme, then the rest of the dwelling on a second loan, thus game the system?

      • The scheme has a limit for the price of home you can purchase. I think the poster is wondering if, for a home that costs more than that price, he can max out the limit, and then put the rest of the purchase price on another loan for which a larger per cent deposit will be required.

  5. TailorTrashMEMBER

    Was out Ermo’s way this morning ….that monstrous
    Melrose Park development needs to be sold …so pump that credit machine …

    • My neck of the woods too.
      It is an abomination. 5K+ units when completed.
      Did you notice what they’ve done to the hold out across from the McDonalds?

    • ErmingtonPlumbingMEMBER

      After the closing down of my Bowlo, I’ve been drinking at Eastwood bizzos mostly as a lot of my Bowlo mates go there but the Parking in Eastwood is Shyte and it’s to far from home.
      I’ve also been popping into the Ryde-Parramatta golf club which is right near that Melroseose Park development.
      This club has little atmosphere as there is no real regular crowd of drinkers there, just golfers who don’t use the Bar much.
      My hope is with the large number of people living close to there soon might generate a crowd of regular social drinkers there.
      It’s a much more preferable location for me as it’s walking distance from home and has a nice bar and deck with views of the Greens but often me and 2 or 3 mates are the only ones there and as a result they close way to early and only serve food on Fridays,… Ridiculous!
      Fingers Crossed.

  6. What next – 100% taxpayer guaranteed loans?

    Let’s hope so. BY the time we reach that point the Pacific peso will be buying about US$ 0.05. (if you’re lucky)

      • I don’t know about jetskis (just yet) but I know motor dealerships are demanding the gubbermint ‘do something’.

        Because, ya know, they deserve to be profitable – and if not, it’s the taxpayer’s obligation to ensure their pockets are filled with gold.

        • darklydrawlMEMBER

          Oh yes. They are really pushing back against those credit worthy checks – turns out too many of their customers really shouldn’t get that auto loan after all (if they follow the rules and paperwork). It was so much more profitable when you could just ‘tick n flick’ them thru the paperwork.

  7. The price cap of 700k means the government is forcing the First Home Buyers into dog box apartments in Sydney. There is not much you can get for 700K these days.

      • Yeah, the income cap forks me unless I pay someone 5K to be nominally “married” to me for long enough to qualify, and with a pre-nup that says he gets no interest in the property.

    • Given this policy has come from the “do nothing” Liberal party, just like previous attempts to improve affordability like the Super scheme I expect the low limits (what can you get for 700k in Sydney?) were implemented to have no material effect.

  8. MountainGuinMEMBER

    Recall the scheme had some low value caps so it’s not for first home owners, rather first apartment owners. Good luck paying the first remediation bill for the flammable cladding or cracking support beams or water ingress or ……..

    • Mining BoganMEMBER

      How’s that going to work when there’s a list of apartments that banks won’t lend for?

      • MountainGuinMEMBER

        Good question, it will be interesting to watch. I suspect the bank black lists are for buildings with known issues or suburbs where values are likely to drop (happy to be corrected). But with low value caps for the scheme the applicants can prob only buy stuff that no one else wants. Will these be in bad areas? Will these have issues the banks are not aware of?

    • That will be a loan to the strata borrowing from Mac Bank at 10% p.a., I’m sure the government will guarantee those as well eventually.

  9. Even StevenMEMBER

    “Ten years after government-backed, sub-pime mortgages triggered Global Financial Crisis and here we are.”

    Yep. This is pretty sick. Depraved.

    • Yup. First time I was offered a $650K mortgage with 10% down, when I was a 457 worker at a job I’d only had for 6 months (and it didn’t pay quite the Sydney household median), I recognised the signs. (Hobbit is a dual citizen.)

  10. Done the numbers for everyone. Its scarier than you think. In short a person on $80k will spend 75% of their take home pay on housing with only $15k left for living. A person on $60/k will spend 100% of their income on housing with no money left to live!

    Here are the numbers for Singles on the maximum allowed income of $125k and purchasing the maximum value property in NSW which is $700k.
    (note: Its worth asking why is a person on 125k only got 5% deposit?) Anyway….
    Stamp Duty = 11k
    5% deposit = 35k
    Loan = 665k
    LTI ratio = 5.32%
    Repayments on 3.33% 30y loan = $2923/m
    Strata, council, water, insur, $7k/y
    TOTAL monthly housing outlays = $3506/m
    Income after tax = $6838/m
    % net income to housing costs = 51%
    Money left for living = $3332/m (40k/y)
    HEM expenditure calculation = $2100/m (25k/y)

    As you can see this person will be ok as long as they keep their job and pay but it does get scary with even slightly lower incomes.This person will be ok to live off but not great. They should keep track of their expenses and not make any major purchases like a 30k car or 50k wedding or 10k holiday each year or they could be in sever stress.

    • Thanks DPM thats good analysis.
      From my limited knowledge, I know that HEM (post BanksRC) is close to 2205 for a single-person.

    • Now imagine that the person (who may or may not be me!) could actually front up a 20% deposit if they had to.
      I.e. they had another $105k sitting around.
      Instead of putting that towards the deposit, they invested in shares and made 4.5% p.a. pre-tax grossed up to 6.0% accounting for dividends. Compared with the 3.33% interest rate, by participating in the govts program, it has allowed him to make 2.67% on $105k p.a. or $2,800 on money he would have previously had to put towards a deposit. Plus, he always has that $105k to hand in case he loses his job, gets married, or needs a new car.
      Seems logical to me?

      • Bingo, Lama. This program also has the benefit of de-risking the wealthy mums and dads who’d go guarantor or toss their assets in as part of their kid’s deposit, coincidentally-not-coincidentally enough.

    • Have you factored in the stamp duty discounts provided to first home buyers? I know they cease after a certain price level, but would have thought 700-something was within it.

      • Yes its factored in. They get a discount but not full. That is capped at 650k. Its also worth mentioning that the 3.3% rate is one of the best around for a 5% deposit. I suspect that banks are going to want a higher return for the risk

  11. Jumping jack flash

    Excellent.
    More debt. More fools.

    The debt must increase or it will crush everything.
    Presently, at least 100 billion dollars is required to repay just the interest on the wad of nonproductive mortgage debt each year.
    Image what that dead money could be used for.

    Forget debt at 200% of income, we need to aim for debt at 400% of income!