Banks blocking homeowners renovation funds

BANKS are denying funds to homeowners looking to upgrade and move into a bigger home.The hardline stance is curtailing the property market by delaying home purchases and forcing homeowners to sell their homes before buying a new one.

Industry experts said lenders are increasingly blocking homeowners from bridging finance - intermediate loans that finances the purchase of a new property while existing property is soldPreviously a common strategy for people selling one home and buying another, banks now claim bridging finance can produce bad debt while other lenders do not even offer the product.

"These loans are now very hard to get, basically because it is just not worth it for the banks," a mortgage industry expert said."Effectively it becomes like a second mortgage on the first property and banks just don't like increasing the amount of money they lend because they have no security to attach that extra money to."Once upon a time when banks weren't getting a good margin, they would have to lend as much as they could, now they are getting a much better margin, they are less inclined to approve riskier loans."The static property market is another reason why banks are loath to approve bridging loans. Several lenders are believed to have been caught out approving such loans to homeowners, only for the eventual sale price of the old home to fall well short of what was agreed to."To put it simply, the economics are against bridging loans, and banks don't want to be increasing their [bad debt] provisions," the expert said.

To sum up, they would not provide any figures that would support the claims. Moreover, they can make opportunity to themselve. And nowadays, there are many people interest in this so it would be a popular issue we talking.

http://www.news.com.au/business