Bank refuse bridging credit, as risk profile moves into “alarm-bell territory”

August 29, 2010 admin Australian Housing 10

The Sydney Daily Telegraph has reported banks are refusing to offer bridging credit as the risks start to mount.

Bridging loans are used by homeowners to buy a property before they sell their existing one. But with homes taking longer to sell in a weak market, and selling at lower prices, the risks of such loans are too high for the banks.

The Telegraph indicates some lenders have approved bridging loans to clients only for the sale of the existing home to fall well short of what was agreed to. These issues are only likely to get worse as the market bubble starts to deflate. Unrealistic vendors may even have trouble selling their existing homes at all.

The Telegraph writes :

Mortgage Choice broker John Manciameli said the banks’ aversion to bridging finance may be due to the fact Sydney homes are taking a lot longer to sell, elevating the lenders’ risk profile into alarm-bell territory.

» Home loans a bridge too far – The Daily Telegraph, 28th August 2010.
» Banks blocking homeowners renovation funds – News Limited, 28th August 2010.




10 Comments

  1. This is what happens when commonsense starts to return to a market previously driven on the whim of an impossibility – i.e. “House Prices Double Every 7 – 10 Years FOREVER”. In fact, house prices do NOT double at this rate forever, and the reality is that at sometime (i.e. now) they will start to (heaven forbid!) decrease to return to the normal, sustainable rate of 2.5 – 3 x average annual income.

    Of course, those who were “expecting” a continued capital gain will be inclined to leave the market (quite possibly with a degree of haste), and any oversupply situation (like the one just around the corner) may well lead to a significant undershoot in values. . . . .

    Nothing like the return of Affordable Housing!!

  3. I think I just heard a big pop…

    If people can’t get bridging loans.. how can they play musical houses?

  5. Ahhhhh the good old spring sales should be a great indication.
    The banks are starting to mitigate their risk and exposure to the property market.
    If cashed up baby boomers with 10 houses can’t get loans for renovations, what hope is there for the rest of the buyers.
    If the banks know whats going to happen, the crash could not be too far away.

    Keep saving people as this will impact all of us!

  6. Yeh FHB I’m waiting for the Spring Sales figures as well.

    We really need another rate rise!

  7. The chance of a rate rise in Australia by the RBA between now and Xmass is becoming smaller by the day, but the Big 4 banks borrowing costs are heading north so good chance they will hike soon anyway.

    Spring will be the final chance for the last of the fools to jump in to a big loan befor the house market starts to fall apart
    so come on people buy that over priced home and get set for a painful lesson in debt. Come on what are you chicken?

    Is that a pin you have in your pocket or are you just happy to see me? ‘POP’

  8. Hmmmmm article in the AGE states that there will be no property crash and we are all dreaming, yet the article towards the end uses the word “hope”.

    http://www.theage.com.au/business/dont-bet-the-house-on-a-property-price-bubble-bursting-20100903-14udh.html

    If then, it is such a great medium for investment and wealth holding why would Woolworths be looking at off loading so much of it?

    http://www.theage.com.au/business/woolies-puts-900m-of-property-up-for-sale-20100906-14wu6.html

    The banks don’t hold the stuff either, they prefer to lease, many other major companies in Oz also chose to rent over ownership despite having the funds to purchase, you have to wonder why.

  9. Walked into Domayne and Harvey Norman (big CREDIT stores pushing almost 40months interest free) this weekend and spoke to the sales people. They said business was very slow and no one was buying.
    Thats because everyone is ploughing 60% of their wage into mortgages and can’t afford any more debt.
    3 words – UNSUSTAINABLE PROPERTY MARKET

    Spoke to my friends (all First Home Buyer Couples) about the recent incentive (no stamp duty on new builds under $600k) and they all laughed – They can only just afford to pay rent of $1800 / mnth, not a mortgage of $4,000/mnth.

    Another 2 words – OVERVALUED ASSET

    Don’t believe the journalists as they are biased toward the bank and estate agents advertisements which they get revenue for. Their articles will always push the ‘under supply’ strategy.

    Oh and another thing, don’t believe estate agents advice. They are not professionals and 95% of them can’t value an asset correctly. They just value properties on historical emotional auction sales.

Comments are closed.