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Zero Percent Down Loans in a Raging Bubble: Didn’t We Try This Before?

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Published : February 21st, 2017
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Category : Opinions and Analysis

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?

Zeo percent down loans depend on several things.

  1. Home prices keep rising
  2. Buyers keep their jobs
  3. Interest rates (mortgage payments) rise lower than income

@ProfSteveKeen 0% down mortgages are not a lifeline. They are a lifetime debt trap as soon as prices stop going up. https://t.co/tCrJPv8mo1

— Mike Mish Shedlock (@MishGEA) February 21, 2017

Mike “Mish” Shedlock

Source : mishtalk.com
Data and Statistics for these countries : Georgia | All
Gold and Silver Prices for these countries : Georgia | All
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IMG Auteur
Mish 13 abonnés
Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. He writes a global economics blog which has commentary 5-7 times a week. He also writes for the Daily Reckoning, Whiskey & Gunpowder, and has over 80 magazine and book cover credits. Visit http://www.sitkapacific.com
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