Some politicians may mean well but their policy ideas don’t always add up, writes Graeme McDonald
W ell, hello to you all and welcome to March. Hasn’t time own already. First- quarter BAS returns will be due shortly and by now you should have done your company and personal tax returns.
It’s also a great time for headlines; the latest and one of my favorite topics is when a politician tries to tell the business world how it should operate.
The one that caught my eye this week was from federal MP and Member for Mallee Andrew Broad.
His view was that banks should lend money to renters with a three-year good rental history without the need for a 20 per cent deposit.
I’m beginning to think that most politicians just open their mouth and talk without thinking. 1. There are already nanciers out there who will use a good rental history as part of a savings history quali cation 2. There are also nanciers out there that will lend to you without the mandatory 20 per cent deposit, you just have to contend with mortgage insurance 3. You may be able to also use other family-related securities to help you get into a house; parental guarantees and the like for the deposit amount.
There are plenty of options out there to get you into a house. But the deposit is not the real stumbling block in a lot of cases, it’s the ability to actually pay the bills and service the loan.
When you rent, you don’t have to pay all the costs associated with a house: things like rates; the service charges that relate to water, gas and electricity; and full insurance cover. All these things cost money.
Typically, rst home buyers also are unprepared to live with second-hand furniture and the like. It all needs to be bright, shiny and new. Can’t afford that? That’s okay, get a credit card or store card and its only $ 300p/ m for the next … ve years.
My advice before you buy a house is check out your parents’ bill for a year and see if, based on that, you can afford the home repayment and living costs etc.
Strangely, though, I can’t see how this will ultimately help anyone trying to buy. If the bank agreed to do this, there would suddenly be an in ux of buyers into the market who would then be competing for an already limited supply market of houses. This would also drive the prices higher and, deposit or no deposit, they probably still won’t be able to buy a house.
Deposit is there to protect all parties. In the case of the banks, it gives them comfort that they have some room to move in the event of values dropping – they don’t need to overreact and move on you straight away. It’s also there to protect the borrower. In case of a certain life event, you have comfort in being able to get some help from the nancier or at least some time to get things back in order. Life events such as losing your job, becoming ill, or becoming unexpectedly pregnant. All these things see a change in circumstances, and a deposit gives you breathing space.
Financiers are constantly in the gun from the media and that’s why they err on the side of caution. If they head down the no- deposit path, I can see the headlines now if it starts to come unstuck.
Anyway, enough from me for now. If you would like to know more or discuss anything, please feel free to give me a call. I sometimes get lonely and it’s always good to hear a friendly voice.
The views expressed above are those of the writer and not those of the Publisher soft his magazine. If you want to know more on this, or you have a suggestion for an article please feel free to email me on email@example.com. The above information and/ or scenarios are for information purposes and should not be treated as specific advice. Please refer to your accountant or financial advisor for information related to your own particular circumstances.
Graeme McDonald A member of the Money Resources Group