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.
NAB’S POSTCODE BLACKLIST
GROUP A: 30 PER CENT DEPOSIT
6390 Boddington WA
6429 Coolgardie WA
6436 Menzie, Ularring WA
6437 Leinster, Sir Samuel WA
6438 Leonora, Lake Darlot WA
6440 Bandya, Beadell, Cosmo Newbery, Lake Wells, Laverton, Neale WA
6442 Kambalda East & West, WA
6642 Meekatharra WA
6646 Wiluna, Lake Carnegie, Little Sandy Desert WA
6710 Cane, Onslow, Peedamulla, Talandji, Yannarie WA
6713 Dampier WA
6714 Antonymyre, Balla Balla, Banynton, Bulgarra, Burrup, Cleaverville, Cooya Pooya, Gap Ridge, Gnoorea, Karratha, Karratha Industrial Estate, Maitland, Mardie, Millars Well, Mulataga, Nickol, Pegs Creek, Sherlock, Stove Hill WA
6716 Pannawonica WA
6718 Roebourne, Whim Creek WA
6720 Cossack, Point Samson, Wickham WA
6721 Port Hedland WA
6725 Eighty Mile Beach WA
6728 St George Ranges WA
6751 Tom Price WA
6753 Newman WA
6754 Paraburdoo WA
6758 Nullagine WA
6760 Marble Bar WA
4413 Auburn QLD
4415 Columboola QLD
4420 Baroondah QLD
4455 Wycombe QLD
4521 Mount Pleasant QLD
4581 Eurong, Fraser Island, Inskip, Rainbow Beach QLD
4660 Apple Tree Creek QLD
4674 Oyster Creek QLD
4678 Bororen, Foreshores, Rodds Bay, Turkey Beach QLD
4680 Gladstone QLD
4715 Mount Murchison QLD
4717 Blackwater QLD
4720 Emerald, Yammala QLD
4737 Sarina QLD
4738 Ilbilbie, Koumala QLD
4740 Beaconsfield QLD
4741 Mount Ossa QLD
4742 Burton, Eaglefield, Elphinstone, Hail Creek, Kemmis, Mount Britton, Nebo, Oxford, Strathfield, Turrawulla, Valkyrie QLD
4743 Suttor, Glenden QLD
4744 Moranbah QLD
4745 Cotherstone, Dysart QLD
4746 May Downs, Middlemount QLD
4800 Conway QLD
4804 Collinsville, Mount Coolon, Mount Wyatt, Newlands, Scottville, Springlands QLD
4805 Bowen QLD
4820 Campaspe QLD
5600 Whyalla, Whyalla Playford SA
5601 Point Lowly SA
5608 Whyalla Norrie, Whyalla Stuart SA
5609 Whyalla Jenkins SA
5725 Olympic Dam, Roxby Downs SA
0885 Alyangula NT
7030 Brighton TAS
7155 Kettering TAS
7467 Queenstown, Lake Margaret
7468 Macquarie Heads, Strahan TAS
7469 Zeehan, Trial Harbour, Renison Bell, Granville Harbour TAS
7470 Rosebery TAS
GROUP B: 20 PER CENT DEPOSIT
2000 Barangaroo, Dawes Point, Haymarket, Millers Point, Sydney, The Rocks NSW
2008 Chippendale, Darlington NSW
2017 Waterloo, Zetland NSW
2019 Banksmeadow, Botany NSW
2037 Forest Lodge, Glebe NSW
2067 Chatswood NSW
2112 Denistone East, Putney, Ryde NSW
2118 Carlingford NSW
2127 Newington, Sydney Olympic Park, Wentworth Point NSW
2140 Homebush NSW
2141 Berala, Lidcombe, Rookwood NSW
2142 Camellia, Clyde, Granville, Holroyd, Rosehill NSW
2144 Auburn NSW
2146 Toongabbie NSW
2150 Harris Park, Parramatta
2153 Balkham Hills, Bella Vista, Winston Hills NSW
2166 Cabramatta, Canley Vale, Canley Heights, Lansvale NSW
2168 Ashcroft, Busby, Cartwright, Green Valley, Heckenberg, Hinchinbrook, Miller, Sadleir
2194 Campsie NSW
2195 Lakemba, Wiley Park NSW
2199 Yagoona NSW
2205 Arncliffe, Turrella, Wolli Creek NSW
2208 Kingsgrove NSW
2209 Beverly Hills, Narwee NSW
2210 Lugarno, Peakhurst, Riverwood NSW
2211 Padstow NSW
2220 Hurstville NSW
2222 Penshurst NSW
2566 Varroville, Bow Bowing, Minto, Raby, St Andrews NSW
2767 Bungarribee, Doonside, Woodcroft NSW
2769 The Ponds NSW
3000 Melbourne VIC
3004 St Kilda Rd VIC
3006 South Bank, South Wharf VIC
3008 Docklands VIC
3067 Abbotsford VIC
4000 Brisbane City, Petrie Terrace, Spring Hill QLD
4006 Bowen Hills, Fortitude Valley, Herston, Newstead QLD
4010 Albion QLD
4032 Chermside QLD
4101 Highgate Hill, South Brisbane, West End QLD
4102 Dutton Park, Woolloongabba QLD
4215 Labrador, Southport QLD
5000 Adelaide SA
5001 Adelaide SA
6000 Perth WA
6003 Highgate, Northbridge WA
6004 East Perth WA
6005 Kings Park, West Perth WA
6100 Burswood, Lathlain, Victoria Park WA
6103 Rivervale WA
800 Darwin NT
