Westpac bank has cut its loan-to-value ratio (LVR) for new customers to 87% of the property value. This means average borrowers could be lent $200,000 less to buy a home. Steve Keen of UWS explains "if you have a $50,000 deposit, and can get a 95% loan, you can buy a $1M property. With an LVR of 90%, you can only buy a $500,000 property without additional funds."
According to an article in the Sunday Telegraph, if the other banks copy Westpac, credit to house buyers will be cut off and property prices could collapse.
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