Australian parliament member Andrew Broad wants banks to accept zero percent down loans.
New.Au calls the proposal a “creative idea”.
Please consider First homebuyers with a good rental history shouldn’t have to save a deposit, Federal MP says.
IS THIS the lifeline struggling first home buyers have been waiting for?
Well, it’s certainly one of the more creative solutions to the country’s housing affordability crisis.
Federal Nationals MP Andrew Broad has suggested banks should forgo a deposit from first homebuyers who have a strong three-year rental history — meaning they can borrow 100 per cent of the loan.He argued that if mortgage repayments are similar to what they are budgeting each month to pay rent, then that should be enough evidence for the bank that they are capable and reliable of servicing a mortgage, without the need for security.
“If your rental payments have been in line with what a modest purchase would be then it should be a consideration,” Mr Broad told news.com.au.“The idea came from a discussion I had with a single mum in Mildura. She has two kids and she applied for nearly 100 houses to rent and couldn’t find a place. She could have bought for the same money as renting but couldn’t save a deposit. But she told me she had been a perfect renter for years.
“It should be in our interest that she is able to achieve homeownership.”
Seems logical right? Struggling first-time buyers will tell you time and time again that the biggest hurdle to homeownership is saving the cash for a deposit — which can be hundreds of thousands of dollars.
Two Questions
Excuse me for asking, but …
- What the hell is “creative” about the proposal?
- Didn’t we try that before, in the US, with disastrous consequences?
Zero percent down loans depend on several things.
- Home prices keep rising
- Buyers keep their jobs
- Interest rates (mortgage payments) rise lower than income
Mike “Mish” Shedlock
That problem is solved by full reserve banking. Under the latter anyone can fund risky mortgages: it’s just that if it all goes belly up, the lenders take a hit, not the taxpayer.
LikeLike
What Happens when the LENDERS,,,become Insolvent…? lolol
LikeLike
They liquidate, as used to happen in America before Goldman Sachs seized control of our government.
LikeLiked by 1 person
Yes, I have seen this movie before.
LikeLike
Realtor here. One of my lenders has been advertising 100% FHA loans for at least a couple weeks now. Yes, we’ve seen it all before, and I’m at a loss to answer when my clients ask how the market looks. The data very much conflicts itself, and I’m a former silicon valley numbers guy.
LikeLiked by 2 people
Even better, how about Negative down payment loans!? Those would really stimulate demand…..
LikeLike
125% mortgages. They used to exist. Time to bring them back 🙂
LikeLike
The FHA loans of today are supposedly much less risky than the NINJA loans of 12 years ago.
But, I remember putting down 20% on a stated income loan back then. Whereas now, buyers are only putting 3.5% down.
I’m no banker, but me thinks the FHA loans of today are far riskier.
If/when the housing market starts going down, all the recent buyers with little to
no equity will be more inclined to sell/foreclose instead of sticking it out. This could magnify a normal housing correction into an all out collapse.
LikeLike
As someone who has bought many properties (as a landlord), I would have to tell the Mum that each and every time she will need THOUSANDS of Dollars more. Murphy’s law. Escrow fees, property taxes, insurance. Cost of moving. Repairs. The HWH might go out and then she no longer can pick up the phone and call her LL.
A leaking roof might end her dream pdq, pretty darn quickly.
In her own interest, she better have a financial cushion.
…
A programmed HP business calculator will show her how some extra repayment early on will lead to the mortgage being paid off years’ earlier 😀
It takes a toughness to forego consumption in the early years. All depends on how she spends it.
I keep observing people doing silly things while drowning in debt. Like buying a NEW car (0 down, 0% interest) instead of an OAP’s car with FSH for a song. Or a low spec 500 € notebook when there are rugged Thinkpads available for 200 € and with maximum RAM and a SSD, the old machine will fly. (Or a SSD might let them use their old computer).
Going shopping without a list? Shopping when hungry? Just forget it: this person won’t cut it. Just look at the silly cell phone plans they choose when there are VoIP alternatives.
A has an older TV, an Iphone 4S (@ $ 40 on Ebay), drives an old car with rust and cooks basic meals with rice.
B has a huge TV, the lastest cell phone and a “nicer car”. All 3 items are requiring monthly payments though.
Why not share wifi with a neighbor? Every little helps! She might even re-use the coffee 😉
It boils down to the individual’s choices. Some can do it, others can’t.
LikeLiked by 1 person
Have owned several homes over 50 years and can agree with the additional costs involved. Rent payment does not equal cost of owning a home over time.
LikeLike
Off topic but interesting, ECB reflation working. How much of exports heading to US?
Even France.
http://uk.mobile.reuters.com/article/idUKKBN1600U8
LikeLike
Ah, the French see a door and Hollande walking out…a bit premature but who can blame them.
LikeLike
LOL. So … the plan is not to help out prospective home-owners, but to help out renters. The problem is that renters cannot come up with a deposit. So if they could buy a house without a down payment, they wouldn’t have to save up for that punishing bogus rental deposit. Problem solved.
LikeLike
I hope to heck that somebody schools that idiot. I’m in Australia and our housing is overpriced. 0% down will just add another 20+% to the price bubble and make it harder for me to ever buy here. Just a few days ago a local newspaper (Sydney) reported that in some suburbs house prices are rising faster each day (up to AUD 2000/day which is about USD 10,000/week) than the average resident earns each week.
LikeLike
In some ways it does not really matter whether it is a zero deposit situation or not.
We can’t and indeed don’t get full ownership of the properties we purchase today (in any country that has become part of the Federal Reserve fiat currency system) because we don’t have full ownership of the instruments we call money today (unlike many years ago – prior to at least 1929 – when we retained our right to own gold and silver (property in general) and therefore any money that was pressed out of these commodities).
It is this old system (The legal rights to property is directly proportional to the rights and freedoms that one has or wants to maintain) that maintains not only one’s unalienable rights but also their freedom in general.
All properties today get put up as collateral against the debt of the nation or state and or both \
I think if a lot of people understood the true ramifications of the use of Federal Reserve fiat currency they (at least one here and there anyway) would think twice about working away for so many years in order to pay what really amounts to a reduced rent (property taxes only) once the principal and interest of the mortgage has been taken off.
If you truly owned the property you would have to request permission to erect simple needed structures (as long as it is done responsibly and does not impinge on anyone else’s rights) and you would not have to pay property taxes either.
This is how America began.
It is a shame that we are no longer taught the connection between the type of money one uses (property vs fiat currency) and one’s ongoing rights.
Charity and welfare would also have to return to being a free will voluntary offering for this to happen again which has about as much chance as global warming, oops I mean climate change being scientifically true.
LikeLike
They say the definition of insanity is doing the same thing over and over and expecting a different result.
Zero percent down = Underwater Borrower
LikeLiked by 1 person
The bankers must be planning on sticking the tax payer in the ass somewhere in the near future. A down payment is the lender’s cusion against the buyer’s default. Taking in consideration that the average down payment is about 3% these days you have to conclude that the market is drying up right now, Might be a good time to get out of the pool early if you wete plannong to do so on a few years anyway.
LikeLike
“It should be in our interest that she is able to achieve homeownership.”
It should be in the taxpayers interest to know why someone with a perfect rental history was refused some 100 times. Were the landlords vetting her application more so than the member of parliament did?
LikeLiked by 1 person
Exactly: “she told me she had been a perfect renter for years”
SHE told . . .
I wonder what her landlord would have said.
LikeLike
0% down is better than the negative equity loans from our recent past. Barney Frank would be proud.
LikeLike
Barney Frank will be proud again. Negative equity loans will return as the potential customer base dwindles. So will no doc loans. After all, history proves that Ben Dover, the perpetual fall guy, will be handily in the wings when that aw fuck moment finally arrives.
LikeLike
There are definitely problems with these loans and surely those involved know this, so the question is whether they simply believe our recent disaster was an acception, or they understand that what perpetuates a collapse is people without jobs unable to make their payments……
Which leads me to think they are anticipating this and intend to use it as a crisis to impose full income replacement using Keynesian/socialist financial policy.
NOTHING happens by accident. EVERYTHING is for cause creating a crisis to valuable to not use.
It doesn’t take a genius to understand the power that complete and absolute dependency provides. Especially when through the power of the media they can divert ALL accountability to predefined demons.
LikeLike
…and don’t forget that the new home owner is going to have the responsibility of upkeep and repairs….
LikeLiked by 1 person
Speaking of “did we try this before?”. I’m hearing ads on the radio for seminars on how to flip houses using other peoples money. Just like 2004-2005. Deja vu all over again?
I think I know what the next act in this play is and I’m heading for the exit.
LikeLike
Don’t you know? Everything is different this time. Just like last time.
LikeLiked by 1 person
“Forget the good old days
Relive the good old days”
George Santayana..sort of
LikeLike
I love it when people who have made a ZERO% (or even a 3.5% in the case of FHA) down payment are referred to as “homeowners”. lol.
What they own (at best) is an out-of-the-money (due to transaction costs) call option on the value of the home.
Yes, they get to live in the home – but have to pay taxes, maintenance and do upkeep for the REAL owner – the bank.
LikeLike
Most renters have higher equity in their homes than buyers with zero down. Renters must have security deposits plus first and last month rent in place to simply move in.
One of the reasons housing crashed so hard before was the fact that many “owners” had no equity, especially with declining home values, and saw it as a financial win to walk away.
RESPONSIBILITY never entered into the equation.
Morals are the survivalist foundation of a society. A society with no commitments, no responsibilities for their actions, has no future in my opinion. And yes, sure, many were duped, mislead, lied to and generally manipulated into their contracts, but that has never been a REAL excuse for not living up to YOUR word. Many simply had no choice, but many more DID and instead acted in what they felt was THEIR best interest. After all….everybody was doing it. We always have an excuse because we have always been lied to. We are SUPPOSED to know better……after all these many generations and with such an extensive written history, one would think…..
LikeLike
The problem happens when our supposed betters are all in on the scam and promoting it. When the Fed has relaxed all regulations, Billionaire bankers are begging to give out NINJA loans, the President is calling for an “ownership society”, and John McCain doesn’t doesn’t even know how many houses he has.
When it is rotten at the top, the bottom learn that the path to success corruption.
LikeLike
You are assuming indentured servitude and the generation of additional origination and bankruptcy resolution fees are bad things. From the perspective of a legislator whose bread is buttered by builders, bankers and lawyers, the plan looks like a winner and it comes wrapped in that infinitely politically useful wrapper of ‘helping’ the little guy, or shiela in this case.
LikeLike
Bravo, Mike.
LikeLike
“Seems logical right? Struggling first-time buyers will tell you time and time again that the biggest hurdle to homeownership is saving the cash for a deposit — which can be hundreds of thousands of dollars.”
…
What an utter moron.
There is a term for “struggling first-time buyers” — renters.
If you can’t save for a down payment you have no business buying a home … as life’s ups and DOWNS will keep coming at you.
With no skin in these folks will bolt at the first sign of trouble … or, they may learn as their American counterparts did that they can stay in their homes for years after defaulting … screwing those that played by the rules even more (as their tax $$s will go for bailing out lenders … all the while the banksters get to keep the upfront fee for making this garbage).
LikeLike
Don’t forget when the municipalities are unable to collect property taxes from these out-of-the-money deadbeats. Or the shifty investment bankers who will bundle up all this garbage debt and stamp an AAA+ credit rating on it. Since it is so highly rated, that makes it attractive to those same municipalities that are struggling to keep their pension plans solvent by buying crapped out mortgages issued to nothing down borrowers.
There’s a Hollywood movie in all this, er, um, I mean a sequel. Let’s call it “The Bigger Short”.
LMAO!
LikeLike
‘ The Borg Sh#t ‘
LikeLike
Over the long run, as long as fiat currency is used as money, house prices will always go up. So will rents.
LikeLike
Yes, but there is this thing known as “mean reversion”.
Those who buy any “asset” (and I don’t even consider a heavily-mortgaged primary residence to be an “asset”) at or near a bubble peak, learn about “mean reversion” the hard way.
LikeLike
A “BAIL-IN” by any other name is still a “BAIL-IN”. Same goes for a “BAIL-OUT”.
One thing you can count on. Depositors and tax payers will get screwed again.
LikeLike
“But she told me she had been a perfect renter for years.”
Unlikely….
LikeLike
“What the hell is “creative” about the proposal?”
“Creative” is Wall Street jargon for:
“What the shills in the media, dependent on advertising to us as we are the only media consumers with any money left to spend, are using as the justification why we are getting paid millions, despite producing zero or less value, being entirely mediocre at absolutely everything, and living large not in any way shape or form due to our own talents nor efforts, but simply off of welfare, money stolen by the Fed and Government from the saps in society who are stuck doing productive work for subsistence wages so that we can preen around we are somehow useful for anything at all.”
LikeLike
Makes total sense to me. He was born in 1975 and assumed office in 2013. The financial crisis and what could go wrong is totally outside any experience he’s gone through. I suspect that is why Wall Street firms get tangled up as well. The 30-40 year old traders were never the ones around during the last crisis.
LikeLike
(LOL)(LOL)(LOL)
PT CONGRESS NEEDS TO GET THE FEDDIE AND FANNIE LOANS OFF THE NATINAONAL BOOK BY INFLATING HOUSING PRICES HIGHER, THAT IS HIGHER, THAN THEY WERE IN 2008.
The two mortgage giants are again reporting record profits this quarter. Fannie Mae (FNMA), the larger of the two, reported an $8.1 billion pretax profit, the largest quarterly pretax income in the company’s history. Meanwhile, Freddie Mac (FMCC) took in $4.6 billion, the second largest in its history.
And all that money, along with a $50.6 billion Fannie Mae tax credit from years ago, will be paid to the federal government. That’s about $63 billion filling Uncle Sam’s coffers so far — and we’re only halfway through the year.
But they still owe us. The question is how much.
There are really two answers.
The short answer is about $65 billion — Fannie Mae has paid $95 billion of its $117 billion debt, and Freddie Mac has paid $30 billion of its $72 billion debt.
How much do Fannie and Freddie still owe us? – CBS News
http://www.cbsnews.com › MoneyWatch › Money
May 29, 2013 – (MoneyWatch) Fannie Mae and Freddie Mac took a lot of money from U.S. … Fannie Mae has paid $95 billion of its $117 billion debt, and Freddie Mac … turn over all profits, regardless of how much or how little, they bring in
PT I DO BELIEVE LOWER PRICED HOUSING IS SELLING, AND HOUSING THAT IS IN “MOVE IN” CONDIITON. HOUSING WITH COMMON WALLS ISN’T MOVING AT ALL, AT LEAST IN MY STATE.
PT THOSE WHO VOTED FOR TRUMP, THE RE MOGUL, EXPECT HIM TO REINFLATE THE RE BUBBLE, SO THEY CAN ONCE AGAIN LIVE OFF OF CREDIT GENERATED FROM THE INFLATION OF THEIR HOUSING ASSET.
IF YOU THINK ABOUT THIS, ISN’T THIS A LOT LIKE THE 1980s LATIN AMERICAN CRISIS WHEN AMERICAN BANKS LENT MONEY TO COUNTRIES TO MAKE THE INTEREST PAYMENTS ON THEIR LOANS FOR FAILED INFRASTRUCTURE PROJECTS?
PT TRUMP ANNOUNCED THAT HE EXPECTED THE GDP TO BE 5% FOR 2017. THE ONLY WAY HE CAN DO THIS IS TO INFLATE ASSETS LIKE INCREAING HOME VALUES OR INCREASED SHARE VALUES. BY INFLATING ASSET HE WILL GET AMERICANS SPEDING MORE ON CREDIT. SO CAN TRUMP INFLATE THE ASSET BUBBLE HIGHER THAN IT WAS BEFORE 2008 IS THE QUESTION?
LikeLike
The affordability crisis is best solved by affordable prices, not debt to the moon.
LikeLike
“IS THIS the lifeline struggling first home buyers have been waiting for?”
Not even close.
LikeLike
In a Platoish sense this is democracy at it’s best.
LikeLike
Real Estate is one of the most “Shark Infested Environments”. Thus “Zero Down” guarantees that people will pay too much and a new foreclosure crisis will erupt.
The wrong people will get the loans. The bankers will depend on the government bailing them out as the bankers contribute/bribe the politicians and the politicians depend on the bankers to finance the necessary deficits that result.
This is a STRUCTURAL PROBLEM that requires a RESET. That is, real estate prices must crash, bankers and other players in real estate must go to jail and we need to look at the example of Iceland. That is a period of pain followed by real prosperity shared among all.
PAIN is REQUIRED.
LikeLike