Westpac has announced an "innovative home loan option" that avoids first home buyers having to come up with a deposit of their own.
The bank will accept equity in the property of an immediate family member as the deposit needed for the loan.
No cash will be required upfront, Westpac says.
The new product is to be called "Family Springboard," and will be available from tomorrow, - Wednesday, July 31.
Westpac says the family members providing the loan support "can" be limited to the amount of the "Springboard" home loan.
“For a number of years now many New Zealanders have been focused on building equity rather than investing. This is a way they can leverage that equity to a level they are comfortable with and help their children or grandchildren into home ownership,” said Ian Blair, general manager of retail bank at Westpac.
“Family Springboard means family can help without having to hand over cash or lose interest on their savings. If the value of the property purchased increases sufficiently or the springboard part of the loan is repaid, the loan could be restructured to remove liability of the family member.”
“It shapes as a good option for first home buyers in particular,” Blair said.
Not an end-run around the RBNZ
Blair denied that the "Springboard" was intended to circumvent any impending Reserve Bank rules.
The Reserve Bank has said it's "seriously considering" using macro-prudential tools to help moderate house price inflation pressures, with restrictions on banks' high loan-to-value ratio (LVR) loans the tool with the best scope to dampen the current strong demand for housing, as well as reduce risk to bank balance sheets.
"It appears that we are going to have an environment where low-equity loans are going to be more difficult to get, and this helps address that issue," Blair said.
"The loan is de-risked by "Mum and Dad" putting up a portion of their equity to help get them into the house."
"That does not increase the risk in the financial system because the required equity for the loan is coming from another source," he added.
Other benefits
Springboard also provides the possibility of not having to incur additional cost in obtaining registered valuations when going to auctions and saves having to pay extra interest charged for low deposit home loans.
It follows the launch earlier this week of another new Westpac home loan product, Choices Offset. This provides customers the ability to use the balance of their eligible Westpac transaction and savings accounts to offset against their floating home loan and only pay interest on the difference.
Offset arrangements mean family members who contribute term deposit balances as part of the family support lose the interest on their investment. Springboard avoids that.
23 Comments
And the disadvantages? It concentrates family risk. When everything goes wrong, the family is often there as a last option bail out, but what if the whole family have the same market concentrated risk, and a systemic shock hits residential property. Oh dear. I guess the taxpayer will be expected to bail out everyone else's risk taking again. GFC participating member attempts to cure high debt/leverage with more debt/leverage hasn't worked so far, nor will it ever.
That is nothing, one of the other big banks is working with the Organ Donner Group enabling family members to capitalise the value of their internal organs and bone marrow. This innovative programme allows those unable to get on the property ladder to financialise other non traditional assets that are currently under performing or in many cases not earning income at all. A bank spokesperson stated that keeping the organs In vivo was a low risk option as the risk would be spread across a large number of 'hosts' This means that fresh organs will always be available as they have been pre-sold. Some community groups have expressed concern as to the inclusion of children in the scheme but as the bank spokesperson stated. "what price can you place on the family home"
The banking cartel's determination to encumber all the lien free collateral in the pursuit of profits is menacing in the extreme. We just don't have the capacity to liquify liabilities by pledging higher value assets, productive or otherwise, to generate the necessary income to service a compounding pool of collective debts. Farmers are just one of many suffering the burden of creating an acceptable debt reducing income on overvalued productive assets. Extra non-productive housing debt is a recipe to tip it over the edge. Who will get to own us as forfeiture envelopes the economy?
That old goat Ollie Newland has got crystal balls, but they are aging, becasue he did not see this one
Last week, on this site he said we had seen all this before and went on to predict all the ways around the RBNZ deposit requirements for homebuyers , but he did not even see this one coming.
Although in fairness to him he did say there would be a " whole lot of new schemes" to get arounfd the new regulations , or words to that effect
... sooner be sick of being right all the time , than sick of being wrong , isn't that right Bernard !
Westpac are showing the creativity which will circumvent any foolish plan to bar certain buyers from the market , or to raise LVR ratios .... and there's alot of financiers other than just the big 4 banks who'll launch into our market to profit from idiotic political policy ....
... build more houses ! ...... problem solved ....
... build more houses ! ...... problem solved ....
Nah, build more rest homes, sell mum and dad's home to finance little Johnnie's nest and all will be well. - Ohh and don't forget Australians have a pre-emptive, exclusive right to own and operate rest homes in NZ financed by Aussie banks.
They must be joking. That's promoting dissension within families.
Stuff it, I have just informed my children I'm leaving all my worldly wealth to the local dogs home
I have two of the buggers. Both of them have just spent holidays in Fiji, unknown to one another. The youngest one who is tighter than a schnappers arse, and that's watertight, took his wife and 3 children, cost $11,000, the older one who can't rub two 2-dollar coins together at the best of times was there the following week.
PS: The youngest's wife has two very elderly parents and a dead-beat older brother, who the elderly parents keep helping out,and every time they help him out, they have to give the daughter the same. That's where the $11,000 holiday came from
This is worrying to say the least. Soon enough it'll mean people without parents will be locked out of the market. Then when the market crashes, and I mean when, it won't just be the couple looking for a home on the hook, it will be the families too. It means if you're single and don't have parents, you probably won't be owning any property any time soon.
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