Why Should Banks Engage and Assist Young Borrowers to Borrow More in a Vertical Market?

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As governments at both Federal and State levels scramble to try and assist first home buyers enter a red hot market, it is worth analysing the current state of the property market and where to from here.

Property prices have soared above all expectations, fuelled by emergency low-interest rates, and is now being called the “covid boom”.

There hasn’t been one particular section of the market that’s grown more than others with First Home Buyers, downsizers, upsizers, flippers, new builders and investors, driving the market to astronomical numbers.

Should the RBA have put the brakes on the property market back in 2015 – 2016 when the writing was on the wall?

Last week it was announced that the Government had extended and increased the current First Home Loan Deposit Scheme (FHLDS) to cater for the significant increase in national property prices (Sydney & Melbourne more particularly).

One has to wonder if both the Federal and State Governments universally agree that housing affordability is the single biggest issue we face, why engage and assist young borrowers to borrow more in a vertical market?

Housing markets need to operate in a free market where government policy should be responsible and based on the long term welfare of the people. The reserve bank seems content to allow the property market to roar ahead, making public statements that interest rates will not change until at least 2023.

It appears to me that current fiscal policy around housing is more focussed on re-election than the welfare of the people.

With the Australian public trillions of dollars in debt, if we do start to see global and local inflation rates creep up, borrows will feel the pinch more rapidly than anytime in history.

  • Let’s hope borrowers are making prudent choices based on realistic longer term interest rates
  • Let’s hope borrowers rely on the expert guidance of their reliable broker partners
  • Let’s hope borrowers look beyond some of these government incentives that in some cases encourage young families to borrow too much.