The new home ownership: rent the house from your bank forever

The ABC reports on a new ‘solution’ to the problem of housing affordability: 50-year mortgages.

And they’re not just coming to Oz. The Courier-Journal in Louisville, Kentucky, USA has a similar report from Caroline Lynch Pieroni about 40 – 50 year loans in the United States.

Our fearless Treasurer has chimed in, trying to sound all Prime Ministerial, only to end up noting the trivially obvious: that such loans mean you’ll be

paying interest and capital for a lot longer.

In fairness, the Shadow Treasurer, Wayne Swan, is even less inspiring. In the ABC report on his reaction, he manages to miss a perfect opportunity to hit the Treasurer’s insipid commentary for six. In the end he only proves he’s better at passive voice say-nothing statements than his conservative counterpart:

I would be extremely wary about another facility out there which encouraged Australians to go further into debt.

Even more galling: in the ABC’s TV report on the topic (also available as a .ram and .asx streaming video file) it isn’t the talking head from the Australian Consumers Association pointing out the actual motive behind these loans. Hell, Nick Coates, Senior Policy Officer Superannuation & Financial Services for the ACA, thinks these things are a good idea because they

give consumers options. They can take out a longer loan and lower their monthly repayments.

Well, yeah, that’s exactly right Nick, but aren’t you forgetting a little something? A little something that it took John Symond — Managing Director of Aussie, a mortgage broker for pity’s sake — to point out:

They’re going to borrow $300,000 and have to pay back over one million dollars.

Which is a tidy profit, even given the 50-year collection period.

So, why does it take someone with a potentially vested interest in loans of this length to point out the obvious? These new deals aren’t

designed to help more people break into the housing market.

They’re designed to help banks and financiers break into the ‘otherwise wouldn’t be buying a house for years if ever’ market, and make even more money from these folk than they do from the more affluent borrowers.

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