Some builders and property developers are offering a $2,500 deposit for First Home Buyers to purchase their H&L packages. Some would say this is a good thing for First Home buyers, however seven years after the United States sub-prime mortgage market began its spectacular collapse, almost taking the global economy with it, high property prices are driving down Australian lending standards. Some first-home buyers may even be using credit cards to help pay house deposits, experts say.

One broker in Victoria tells buyers they can raise a 5 per cent deposit with as little as $2500. The rest comes from a personal loan and a government first-home owners grant, which is worth $10,000 in Victoria. On a $400,000 property, that’s a debt gearing of 99.375 per cent (which is not a prudent move).

Twice this month the Reserve Bank of Australia has warned against high-risk home lending. On July 3, RBA governor Glenn Stevens told investors to take care, especially in the Sydney market, and urged lenders to maintain strong standards.

Buying a property, whether it’s your first home or an investment, should be viewed as a business decision with your risk and exposure to potential loss seriously considered.

Contact us to speak to a financial broker that will give you independent, honest advice about your circumstances.

The full article appeared in Australian Financial Review here.