Friday, 24 January 2020

Routing around the regulatory damage

I rather like this entrepreneurial response to the Reserve Bank's loan-to-value-ratio regulations.

Recall that the Bank required that banks issue no more than a small proportion of home loans to lenders with less than 20% equity.

I expected that this would have folks finding alternative sources of finance to help get to that 20% mark. Some will have family that can help, but not everyone.

And here's a market response.

YouOwn will put up some of the initial equity and take a part ownership stake, with the house buyer paying an equity charge to YouOwn. When the owner builds up enough equity to start considering buying out YouOwn's stake, they send it to a valuer so YouOwn gets its share of any gain.

It's a bit surprising that it's taken so long for this kind of thing to come through, but there was a fair bit of uncertainty about how long the LVR rules would stick around too.

HT: Reader mailbag. Thanks Pierre!

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