Genworth Financial has put its weight behind forty year mortgages, heralding the product as an important tool to combat the housing affordability crisis.
Martin Barter, Genworth Financial’s CEO, believes that longer term loans are the key to getting people into home ownership earlier.
For lenders looking for a point of difference in a competitive market, the addition of 40 year products to their offering can also add considerable value to buyers most exposed to affordability constraints.
“Reduced monthly repayments are a key benefit of a 40 year loan,” says Barter. “They are particularly suitable for the first time buyer market as this is the sector hardest hit by housing affordability.”
Genworth is the only Australian insurer that will currently insure 40 year loans.
Already a mainstream mortgage option overseas, the loan has proven to be especially popular in Canada. US borrowers are also well accustomed to longer term loans, with the 50 year loan growing rapidly in popularity.
Despite this strong presence in the international markets, 40 year mortgages currently represent only a fraction of the home loans written in Australia.
Frank Knez, associate director of product and marketing with Resimac believes that, with the right marketing, the product will gain popularity in Australia.
“Mortgage managers should focus their marketing efforts on the features of the product, and how they are relevant to the borrower,” says Knez.
The longer term is one such benefit and can be promoted to first home buyers who may not be comfortable with the repayment amounts on shorter loans.
“A loan product with 40 year terms provides additional solutions to borrowers who may not otherwise meet the serviceability requirements of a traditional 30 year loan,” says Knez.
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