Borrowers need to do their homework
I was disappointed in the advice provided by the two experts (“What to buy with $80k”, September) and to find that the amount you can borrow to purchase a property seems to be contingent only on how much of a deposit you can raise! What happened to any discussion about income and calculating how much you can afford in repayments?
There also was no mention of the fact that there will likely be an increase in interest rates (or several), which could significantly affect the ability to repay a loan. Thankfully Jane Slack-Smith did mention having a buffer in case of becoming a one-income family but, really, where is the advice to people to do their own homework and to give them the tools to be able to do that?
It is up to the borrower, not the lender, to determine the level of debt that is manageable over the long term.
ED: Thank you for your feedback, Kate. You are absolutely right – you can have the fattest deposit but without serviceability you won’t get the go-ahead from any bank. Ask the Experts covers many points and both of our experts did touch on serviceability. Jason Petersen suggested the need for a comprehensive financial plan so as to only take on as much risk as the borrower could afford and Jane discussed the need for a buffer. But I appreciate that more could have been said.
I believe both lenders and borrowers need to be responsible when it comes to serviceability. The royal commission into banking will no doubt create some big changes on the lending side. I'm not sure how much longer banks will just rely on the household expenditure measure (HEM) benchmark when assessing loans. One thing is for sure: it will be harder to get a loan.