Home Loans: 30% of first-time buyers 'rejected'

Friday 13 November 2009

Article by Mozo

A third of first-time buyers applying for home loans are rejected, it has been claimed.

This is according to Dean Rushton, Loan Market Group chief operating officer, who said 30 per cent of this demographic are being turned away because they do not have enough money put away – such as high interest savings – AAP reports.

Further exacerbating the situation for those stepping onto the property ladder is the government rollback of its First Home Owner Grant and stringent lending conditions, Mr Rushton explained.

"The major lenders are in a competitive position where they can pick and choose who they want to lend money to and there is little room to move for applicants who do not fit the box," he remarked.

Lending rules, which have become tighter as a result of the global economic downturn, require potential borrowers to make a savings contribution of around five per cent when purchasing a house – something that is causing problems for first-time buyers.

In light of this, Mr Rushton advised people to plan ahead in terms of savings.

This echoes sentiment recently expressed by Westpac chief executive officer Gail Kelly, who said more needs to be done to encourage people to put more cash aside in savings accounts to avoid future crises.

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