Westpac have today announced that First Home Buyers are in fact lower risk borrowers than many other types of borrowers such as investors, second home buyers or empty nesters. This is somewhat counter-intuitive, surely people who have not borrowed before and have a lower asset position would be a higher risk?
In this case the statistics don’t lie. We regularly hear from the other banks such as CBA and St George that they find a lower rate of arrears in their first home buyer loan book. The reasons for this are simple:
- First home buyers are quick to get another job if they lose theirs.
- Most first home buyers cannot get approval if they do not have genuine savings, whereas second home buyers and investors often have this requirement waived as they have equity.
- Their loan sizes tend to be smaller and their properties tend to be more affordable, so in the event of financial hardship they have more options available to help them get back on track.
Article from Australian Broker News
“First home buyers, though typically more leveraged than other market segments, show the best arrears performance, Westpac has indicated.
In its third quarter results announcement, Westpac CEO Gail Kelly said that the bank’s first home owner portfolio saw its best performance and lowest level of delinquencies. The bank’s general manager of mortgage broker distribution Huw Bough told Australian BrokerNews this could be due to first home buyers becoming savvier about the terms and details of home loans.
“We know that first home buyers have more access to financial education, seminars, internet online tools, and social media specifically targeted at them. This could mean they are most likely to understand the details of their home loan under the current economic environment where there is a focus to pay down debt and save more,” Bough commented.
In announcing its results, the bank indicated it had seen subdued mortgage growth, growing its portfolio just above system. While demand for credit was slow, Bough commented that brokers continue to introduce more than 40% of the bank’s mortgage business. He said the bank would drive the channel’s growth through building relationships between brokers and local branch staff.
“We are doing this by introducing brokers to our bank managers and their teams locally to build strengthened partnerships that will benefit the customer,” he said.”
– Source Australian Broker News 18/08/2011