Despite the differences in prepayment penalties, Phillips considers the Australian mortgage market as one of the best in the world – “It’s flexible, highly competitive and borrowers benefit from that. In many ways, I reckon the US would love parts of the system we’ve got.”
Tony MacRae (pictured, left), chief commercial officer at Bluestone Home Loans, agrees that there are fundamental differences between the US and Australian markets.
“While there may be consumer appeal for 30-year fixed loans, Australia’s funding model is very different to the US, where long-term fixed rates are supported by a deep secondary mortgage market,” said MacRae. “It’s not something that can be easily replicated here, and there are significant funding and pricing challenges lenders would need to investigate before participating.”
A history lesson
Nonetheless, One Nation’s off-the-cuff policy suggestion is not particularly unique – the New South Wales government’s ill-fated HomeFund, which ran through the 80s and early 90s, offered mortgages for low-income borrowers for loan terms between 25 and 30 years.
Rising rates and a flawed “low-start” loan design (initial repayments didn’t even cover the costs of accruing interest) caused mass borrower defaults and a genuine social housing scandal, forcing a government bailout and restructuring in 1993.