Yellow Brick Road, an emerging non-bank lender, has taken its fight to the big banks by removing the need for home loan applicants to show proof of savings. This move is aimed squarely at first home buyers who may have been gifted a deposit for their home.
Yellow Brick Road will only look at the deposit being available, and also that the applicants can make the repayments. So if a buyer has come into money from parents or had a lucky night at the casino or the horses, the fact that the deposit is there is sufficient.
Under existing lending criteria at the major banks, such home buyers would be denied a loan because they could not show the lender any proof they are good savers. Most lenders make applicants submit upwards of three months of bank statements to show a savings pattern.
Yellow Brick Road has been started by Mark Bouris, star of the Australian Apprentice, Mark told The Daily Telegraph the new First Step loan product removes a major hurdle that stops thousands of Australians from buying property.
“Since the First Home Owners Grant was reduced, banks knocked out a lot of first home owners from applying because they are relying on a combination of the grant and a gift from parents or someone else,” Mr Bouris said.
“The way the banks changed the credit criteria is they say ‘well, we want to be really sure about your savings, so you convince us that you’re a good saver’.
“For our loans, if you have inherited the money, won it on Lotto, or you received a great tax return, it doesn’t matter, as long as you’ve got a deposit and can service it.”
First home buyers have been vanishing from the property market since the Australian Federal Government has scaled back its First Home Buyers Grant to its historical level of $7000. The Australian Bureau of Statistics figures from June show first home buyer commitments, as a percentage of total owner-occupied housing finance commitments, fell 11.1 per cent, the equivalent of 60,000 first home buyers.