By Nick Gardner and Miawling LamThe Sunday Telegraph October 25, 2009
BANKS are urging first-home buyers to lodge mortgage applications ahead of the next rate rise so they qualify for the biggest possible loans, an investigation by The Sunday Telegraph has found.
Despite financial markets factoring increases of 2.5 per cent by December 2010, potential buyers risk having the amount they can borrow scaled back if they delay lodging applications.
The danger of such a tactic is buyers being rushed into loans they can barely afford today, which become unaffordable when higher rates kick in.
A Sunday Telegraph journalist sought a home loan through major banks last week.
Based on an income of $61,000, a deposit of $55,000, and a good savings record, NAB offered a loan of "at least $450,000".
"You could bid on a property at auction this weekend knowing that is the least we will lend you," a mortgage adviser at NAB's Surry Hills branch said.
He said the loan amount could be even greater once the buyer went through the official application process, when some "human discretion" could be applied.
"But you will need to hurry to get in before there is another rate increase as that will reduce the amount you can borrow," he said.
A $450,000 loan, equal to 7.5 times stated income, would require repayments of $2496, based on the NAB variable rate of 5.29 per cent -- more than half of the buyer's income.
And if rates increase by 2.4 per cent over the next year, as tipped, repayments will rise by $700 a month, leaving less than $1000 a month to live on.
