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Amid a backdrop of rising interest rates and many Australian struggling to raise the necessary minimum 20 per cent first-home buyer deposit, AMP Bank (AMP) has set out to “drive its growth aspirations” via a new partnership with proptech Bricklet and its homeowner platform, the lender confirmed on Tuesday (22 November).
Described as an “industry first” and initially only available through the broker channel (accredited), the collaboration aims to “help more Australians get into the property market sooner” by enabling equity partners to provide funds to make up a home deposit shortfall.
Following a successful pilot, Bricklet’s platform tie-in with AMP will see an investor (or multiple investors) contribute to a home buyer's deposit and they will receive an equity stake in the property, relative to their contribution. The buyer, in turn, makes mortgage repayments in addition to paying an “occupancy fee” to the investor, they stated. The home loan is provided by AMP Bank, the first bank to partner with the platform.
At any time, the homeowner can ‘buy out’ the investor portion of the equity, if they so choose to, or the homeowner can choose to sell the property.
To qualify, applicants must demonstrate they can meet AMP Bank’s lending and serviceability criteria, in addition to the occupancy fee to Bricklet.
AMP said the partnership would help it grow part is first home buyer loan book.
AMP Bank group executive Sean O’Malley commented: “We don't do a lot of first home buyer, so when I say not much [I mean] about eight or 9 per cent of our flow is first home buyer.
“I think it ranges quite a bit, but I think it's... a little bit about the nature of the bank; we skew slightly to the more affluent in the market,” he explained.
“[It’s] just the nature of our customer proposition, the nature of our distribution - of being a primarily a broker-introduced bank means we do skew towards a slightly more affluent [set] than average,” he said.
Asked if this opens up a relatively new market to AMP, Mr O’Malley confirmed: “It does. It helps us address … probably a little more first-time buyer, but it also helps address those people who today we wouldn't be able to help into a home.”
Deposit struggles for a select group of borrowers
Mr O’Malley further explained that despite falling property prices in Australia, many people are still struggling to save a deposit for their first home.
“Owning property is an important part of building long-term wealth and financial security, so we are focused on supporting more Australians to take this important step earlier in life. This offer provides a different option for those who haven’t yet saved a large deposit but are earning enough to meet the ongoing financial commitment of a home loan.
“AMP Bank is pleased to have partnered with Bricklet to support Australians in realising their home ownership aspirations.
“It’s an example of AMP Bank innovating, leveraging the expertise of our partners to move quickly, supporting our customers, and driving our growth aspirations for the bank.”
Changed times and FHB challenges
At the launch, AMP chief economist Shane Oliver underlined the difficulties facing FHBs in particular, from a macro-economic view given changes the demographic faces in modern Australian society.
“As you know that affordability issues have been around for as long as I can recall, but it used to be an equal part [of] house prices and interest rates.
“And in fact, affordability measured back then would be a function of someone's income, house prices and interest rates.
“Then over the last 10-20 years, the focus has all been on house prices through that low-interest rate period.
“Now we've got rising interest rates so that obviously puts a lot of pressure on the property market, and we're seeing quite a significant downswing in prices,” Mr Oliver stated.
“Interestingly, I think it's more … demand-side driven than supply side; we're not seeing a lot of people defaulting on their loans – [but] some might say ‘well, it's too early for that yet or having to sell’.
“But I think the reality is if you go back through the last few cycles, prices don't normally bottom out and start rising again until interest rates start coming down.”
Housing shortage and construction supply
Mr Oliver highlighted that housing supply continued to be constrained by "a massive pipeline or backlog of work yet to be completed.”
The Bricklet loan capability can be applied to both existing and new resi builds, Bricklet CEO Darren Younger confirmed.
“We’re enabling people to get a mortgage for their home and then rent the remaining piece from an investor.
“There are now a variety of opportunities for homebuyers, but it comes down to how they want to purchase property, and what they qualify for.
“One of the main reasons we created this was because a lot of people don’t qualify for government schemes.
“They either earn a bit too much; have already owned before; don’t meet the price cap; or miss out because spots are limited.
“Buyers get all the benefits of living in the home, and all the gains from price growth of their share of the house,” Mr Younger stated.
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