One of the country’s largest mortgage broking groups is calling on lenders to consider rental payments as evidence of first home buyers’ ability to service a home loan.
According to Loan Market Group’s chief operating officer Dean Rushton, first home buyers will struggle to enter the property market until the banks view rental repayments as evidence that they can meet their mortgage payments.
“Australian lenders require a percentage of the purchase price – normally five per cent – to be saved for all loans but it is very hard for people paying the exorbitant rents customary these days to save much money,” he said.
Without a doubt, the high cost of renting is a huge barrier to home ownership for most aspiring home buyers.
According to the latest Bankwest/Mortgage and Finance Association (MFAA) Home Finance Index more than 50 per cent of prospective first home buyers feel stuck in a rental rut.
If lenders recognised rental payments as an ability to honour a large financial commitment perhaps many of them would be able to pursue their home ownership dream.
Just whether the banks will move to adopt such a policy remains to be seen, but there are promising signs.
RAMS recently launched its Rent Saver Home Loan which allows home buyers who have been renting for 12 months or longer to use their rental history as evidence of their ability to make loan repayments.
In addition, many lenders are now offering first home buyers higher LVR loans, which means first home buyers may be able to borrow up to as much as 95 per cent of their property’s purchase price, reducing some of the burden of saving a deposit.
In the meantime, if you are one of the many hopeful home buyers struggling to save a deposit make sure you grab a copy of the November issue of First Property Buyer, in store next week.
In our cover story we show you how you can double your deposit within 12 months with just a few changes to your financial practices, routines and choices.