As U.K. Prime Minister Gordon Brown calls for the return of traditional banking methods in Britain and the abolishing of 100% mortgages, Australian banks are scrambling to prevent Kevin Rudd’s First Home Owners Boost turning into a subprime frenzy.
Today, the Commonwealth Bank of Australia announced the tightening of borrowing rules directed towards the surge of first home buyers in a frenzy to grab the government grant before it expires. The CBA will no require home buyers to have a 3 per cent deposit excluding any government grants.
The Australian reports :
The move is in response to growing industry concerns about the quality of loans to the fast-growing, first-home buyer market and is in anticipation of interest-rate hikes in coming years, due to the expected inflationary impact of the large, recent increase in household income.
This follows moves from the NAB in January cutting its maximum Loan to Value Ratio (LVR) to 95% and ANZ in November cutting its LVR to 90%.
With the prospects of new owners having negative equity in years to come, this goes a small way to bring back responsible lending, although we are still a long way from the days of once requiring a 20% deposit.
» Brown moves to end 100 per cent home loans – The Independent, February 23rd 2009.
» CBA tightens mortgages amid new deposit rules – The Australian, February 23rd 2009.
But there’s no subprime in Australia, the RBA says so!