Just when you thought the banks couldn’t make it any harder for first homebuyers to secure a place of their own, one of the major banks has announced you’ll now need a 30% deposit if you want to buy in one of its blacklisted ‘risky’ suburbs.

NAB’s blacklist contains more than 600 suburbs and towns where borrowers will now be required to put down a deposit of as much as 30% in order to purchase a property.

The list, which was distributed to mortgage brokers last week, lays out “Group A” postcodes in rural areas where borrowing will only be allowed up to 70% of the property’s value, and “Group B” postcodes where the maximum loan-to-value ratio permitted will be 80%.

The second list includes Sydney’s Chippendale, Waterloo, Barangaroo and Homebush suburbs, as well as the Melbourne, Adelaide and Brisbane CBDs.

NAB is not the first bank to make this kind of move; Macquarie Bank cracked down earlier this year and it’s also believed that Westpac has imposed similar restrictions on high-risk lending.

Mortgage Choice chief executive John Flavell said these changes would present just another obstacle for young Australians trying to purchase their first home.

“The reality is, property is expensive across Australia and many first homebuyers are being forced to put their property ownership goals on the backburner,” Mr Flavell said, adding that saving for even a 10% deposit was an uphill struggle for some earners.

“I understand that Australia’s lenders have to make tough decisions sometimes.

“While these changes will reduce the bank’s level of risk, they will also make it harder for first homebuyers to get their foot on the property ladder.”

NAB said in a statement that it considered “a range of economic factors” and market indicators in working out the risk profile of its loan book.

“We recognise that no two suburbs are the same, and there are some geographic areas across Australia which have been impacted by local economic conditions,” the statement said.

“As a responsible lender, we adopt strategies in these geographic areas that seek to reduce the risk to our customers and our business.”

Another factor adding to the problem for first homebuyers is the current rate of increase in property prices. The latest data from CoreLogic shows there has been a 7.1% increase over the past two years, bringing the median price up to $575,000. It wouldn’t be so bad if wages were increasing at the same rate… but they’re not.

The average Australian fulltime worker saw their salary rise just 2.22% to $78,832 in the past year.

A survey from Mortgage Choice has found that it now takes one in three first homebuyers over five years to scrape a deposit together.

“The reality is house price growth continues to outpace the growth in incomes, which means first homebuyers are forced to save for longer,” Mr Flavell said as the research was unveiled last week.

Many property owners believe it will only take a year or two for them to save enough for a deposit, so the reality can come as quite a shock and derail their plans, he said.

Getting creative
Justine Davies, editor of comparison website Canstar, said hopeful homebuyers shouldn’t entirely give up hope.

“It’s certainly a conversation they should be having with any lender upfront when they’re discussing pre-approvals,” Ms Davies said.

“Rather than limiting their property hunt though, I’d encourage would-be buyers to expand their lender shopping list instead.”

Although about 80% of home loans go through the big four banks, she said, “there are more than 100 home loan lenders in the market”. Plenty of these still have options for borrowers who have a deposit of 10% or less, as do NAB and Westpac if you’re not aiming for one of their ‘risky’ suburbs.

“So unless you’re looking at a really, really bad property purchase decision, chances are you’ll be able to find a lender willing to do business,” Ms Davies said.

“Of course if borrowing blacklists are expanding rapidly, it does indicate that banks are being pretty cautious about certain areas — buyers should also mix their enthusiasm with a bit of caution too.”

She said that suburb blacklists were nothing new – they are just part and parcel of running a loan book, especially for the big banks which have a greater risk of overexposure.

“The larger institutions are more likely to need a formal list because their exposure to the property market is higher,” Ms Davies said.

“For a small credit union, they don’t have the market share or the amount of business that would cause over exposure in one area to really be a problem … That’s why it’s so important for borrowers with a less than 20 per cent deposit to really shop around for lenders.”

This may be true, but having a smaller deposit will also cost you more in the long run due to mortgage insurance and less favourable interest rates, leaving many first homebuyers feeling like they’re in a lose-lose situation.


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