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Westpac offers 110% home loan

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  • Westpac offers 110% home loan

    Westpac offers 110% home loan
    by Rob Stock and Emma Page - Sunday Star Times | Sunday, 13 April 2008

    FORGET THE 100% mortgage. Westpac borrowers can now borrow up to 110% of the value of their home through a new lending unit the bank has begun promoting to brokers.

    Several brokers have told the Sunday Star-Times that Westpac began promoting 110% lending several weeks ago, although it is reserved for high-earning professionals with good career prospects.

    Promotion of the 110% loan comes as ordinary 100% mortgages are becoming harder for ordinary people to get because higher mortgage rates have hiked repayments beyond their reach.

    But brokers say it is borrowers, not banks, which have stopped the 100% market in its tracks because borrowers feared they would be leveraging themselves into a financial nightmare.

    Westpac spokesman Craig Dowling said the bank had created a specialist lending unit about a year ago. "It was set up to ensure there is a prudent and close focus on these types of loans," he said.

    He said Westpac lent up to 100% of the value of a house where people could afford repayments. But if they still had headroom, they could consolidate consumer debts into a home loan of 110%.

    Dowling said while the slump in property prices had led the bank to be more cautious, serviceability was still the key to both 100% and 110% deals.

    Westpac is not alone to set up a beind-the-scenes company to handle more extreme loans. ANZ National has Nationwide, a company which operates in the same space.

    But such extreme lending alarms some advisers and consumer advocates.

    Financial adviser Lisa Dudson said extreme loans were not a good idea for anyone in the current market.

    "Right now they're hard to get your head around," she said.

    But Dudson doesn't entirely blame the banks. Lenders were only responding to consumer demand, she said. But she questioned why high income people could not save a deposit and why they needed to consolidate debt.

    "I think borrowers need to take far more responsibility too," Dudson said.

    Consumers Institute chief executive Sue Chetwin said if banks were lending to high income earners who could afford 100% even 110% mortgages, it was a willing buyer-willing seller situation. "But it's irresponsible for people who are struggling," she said.

    Massey University lecturer David Tripe said only about 10,000 of the approximate 600,000 mortgages would be 100% loans.

    While 100% mortgages have never been cheap, or easy to get, banks have in recent weeks been tightening the screws and demanding even more rapid repayments in the early years of such loans.

    Accelerated repayments are routinely expected for 100% mortgage borrowers, with loans set up to achieve a 90% loan-to-value ratio within a short time frame.

    ASB and National want that to be achieved within five years, while Westpac wants it done over three years.

    Other banks which do 100% deals are BankDirect, a subsidiary of ASB, and Bank of New Zealand, which says it has been more conservative in pushing 100% loans than its rivals.

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    Strange article as right now I am struggling to find homes for many 95% borrowers who could 2 weeks ago borrow easily.
    Hamish Patel | ph: 09 625 4693 | mob: 021 625 693
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