With the majority of banks now lending money to borrowers with only a five per cent deposit, is there a chance we could return to the pre-GFC days of 100 per cent loans?
Aussie’s Founder and Executive Chairman John Symond said while there are a few very small players in the market who may offer a 100 per cent loan product, he was certain the practice would not make a full-scale return.
“I’m not a believer in people buying a home without a deposit so this 100 per cent lending will still be scarce and that’s a good thing,” he said.
Mr Symond said Australians need a buffer, particularly in uncertain times.
“Australia has come through the GFC quite well, our unemployment levels are low. Most people who want a job, have got a job,” he said. “But there is still a question mark in terms of the global economy and other problems around the world”
Mr Symond said borrowers should be very cautious when they take on a home loan, and advised they avoid 100% loans.
“I don’t think that it’s a good healthy thing to do, to go and borrow 100 per cent,” he said. “You should have five per cent at least, and then even more, the bigger the deposit the better as it gives you a buffer just in case.”
“Young people start a family, or they may lose an income or if anything happens which is unexpected, for example just look at the Queensland floods,” he said.
“People will be out of jobs for many, many months so uncertainty can always happen so my feeling is (to) be cautious and don’t over-borrow and make sure when you decide to buy a home, and you have to borrow a lot of money, make sure you’re covered.”
“Take into account the ‘what if’s’ – what if you started a family? What if you lost your job?”