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The proposed 30 June deadline for the Government’s First Home Owner Boost scheme is seeing our financial institutions inundated with loan applications as first time buyers rush to take advantage of up to $24,000 in bonus payments.
Whilst there is some speculation that the boost scheme may be extended beyond the initial 30 June deadline, it would seem that many first time buyers are not waiting around to find out.
A combination of the Government incentives, the dramatic drop in interest rates as well as relatively affordable housing prices has seen a dramatic influx of home loan applications across all lending institutions, but particularly the major banks.
Last year’s downturn in the housing market saw many lenders cutting back on staff in the lending departments as there simply was not enough work for them. However, in recent times, banks and other lenders have found themselves unable to cope with the dramatic increase in the number of applications as the unexpected surge has left them understaffed and unprepared to handle the load.
It is reported that delays in processing and approving loans are further compounded by the fact that a majority of applicants are first time borrowers and as a result they are somewhat inexperienced when it comes to the applications process. Not only are there a greater number of applications to process but lending staff are finding that many of the application documents are not sufficiently or correctly completed. This results in even more workload and longer approval times as forms need to be returned, re-completed and re-submitted and in some cases the approval process is so lengthy that applicants have missed settlement dates due to the loan not being finalised in time.
As we continue to ride the wave of economic uncertainty, not all the blame can necessarily be attributed to the inexperience of the applicants. Lenders have considered that perhaps they were in fact too hasty to hand out money in the period leading up to the downfall. In light of that, lending criteria has been tightened and requirements for applications have become considerably more comprehensive. Loan applications can be rejected for any number of minor defaults such as late phone bills or having been in arrears on any kind of repayment and lenders are often requiring larger deposits and have reduced the loan-to-value ratios that they are offering, in some cases from the full 100% to 90% or as low as 70% for some low-doc loans.
So, whilst it may be an optimal time for first home buyers because of the Government bonus and housing affordability, it appears that under current conditions they may have to work a little harder than first expected in order to achieve the great Australian dream of owning their own home.
If you are considering, or are in the process of purchasing your first home, The Quinn Group can assist you in a range of areas, from budgeting and financial planning advice to contract reviews and conveyancing. For more information contact us on 1300 QUINNS or click here to submit an online enquiry.