A warning for first home buyers!

[Mr J]

A friend of a friend is a mortgage broker in Sydney, he says he has been rushed off his feet with business from first home buyers for the last 6 months, but he also says 90% of them cannot really afford the repayments they are taking on but the money is still lent and it is justified by assuming that their incomes will increase over time.

Maybe some of them will learn something from the experience.

 

[helicart]

I'm not sure where you get $5 - $10K from?

Stand alone home rates around $2K on about 900sq block. Building insurance about $500.
Maintenance about $1K tops.

Obviously a unit in block would add body corporate.

Add irregular maintenance costs for apartments, that are not covered by body corp fees 90% of the time.

Add depreciation contingency fund for houses.

 

[IFocus]

Sorry IFocus I don’t follow you here,

I agree, the economy hinges on the fact that house prices need to stabilize and not continue on a downward spiral whether that’s right or wrong I’m not sure but personally I think that prices should find their own levels, not propped up artificially by government intervention.

But I am certain that most of the cash is ending up in the wrong hands, and if pulling the grant causes a drop in prices (or crash) in first home buyers areas, surely that would be a better outcome for young couples looking at buying their first homes.

Cutz

Housing lending makes up a large part of bank lending in Oz.

The value of those houses affects the capitalization / confidence in our banking system

If house prices were to fall like in the US then basically that would have a dramatic effect on the ability of our banks to lend in fact we could end up where the banks could not provide finance and the Gov would have to pour money to maintain their capitalization levels bit like the US or worst still like the UK.

Once you lose confidence in your banks it gets really hard.

I think house prices in Oz have been over heated mainly because of the easy credit that has existed. Easy credit always, repeat always ends in bubbles.

The point of the FHBG is to firm up the most vulnerable part of the market ie the bottom. Its a free goal politically for Rudd as its a very effective move plus wins more Rudd voters.

Notice Turnbull hasn't criticized