Bluestone Thanks Banks
The Age
Tuesday October 8, 2002
Sydney
Bluestone Mortgages' Alistair Jeffery dismisses last week's regulatory warnings about the housing bubble and banks' aggressive lending practices as mild, but his operation is seeing the fallout first-hand.
Mr Jeffery said referrals and phone calls to his two-year-old ``non-conforming" mortgages operation rose noticeably during the week, suggesting some big banks had suddenly decided to reject prospective borrowers that they might otherwise have lent to.
He said the Reserve Bank of Australia and the Australian Prudential Regulation Authority were definitely trying to ``talk down" the housing market, and this had rattled mortgage insurers and the major banks' credit approval teams.
``I think it's quite appropriate. People would be well advised to be cautious," he said.
Bluestone lends to people who lack the ability to secure a mortgage from the big banks, usually because they are self-employed (without consistent income), are migrants or have a poor credit history.
But the nature of Mr Jeffery's business does not necessarily mean that he is more exposed should the housing market burst.
Unlike the ``linear" mortgage pricing of the banks, Bluestone's loans are priced to reflect the risks, with interest rates from 7.6 per cent to 10.5 per cent.
``This is a secured loan and the reason it's not a credit card or personal loan interest rate is that it is secured," he said.
The loans are not mortgage insured. Bluestone's portfolio generates about 10 times the arrears levels of banks' mortgage portfolios (which are traditionally 1 per cent or less), but this is budgeted into rates.
Mr Jeffery said borrowers should work out the weighted average cost of their debt burden, including credit cards and personal loans and build in a buffer or cushion to ensure they are able to service the mortgage.
There are four players in the non-conforming market: Bluestone, GE Capital, Liberty Financial and Pepper Home Loans, with 2 per cent market share.
© 2002 The Age
Share This