The Sydney Daily Telegraph has reported banks are refusing to offer bridging credit as the risks start to mount.
Bridging loans are used by homeowners to buy a property before they sell their existing one. But with homes taking longer to sell in a weak market, and selling at lower prices, the risks of such loans are too high for the banks.
The Telegraph indicates some lenders have approved bridging loans to clients only for the sale of the existing home to fall well short of what was agreed to. These issues are only likely to get worse as the market bubble starts to deflate. Unrealistic vendors may even have trouble selling their existing homes at all.
The Telegraph writes :
Mortgage Choice broker John Manciameli said the banks’ aversion to bridging finance may be due to the fact Sydney homes are taking a lot longer to sell, elevating the lenders’ risk profile into alarm-bell territory.