First home buyers risky for banks

Banks are sitting on a bad debt time bomb caused by increasing numbers of first home buyers entering the market says research from Royal Bank of Scotland.

Since the increased first home buyers grant was introduced by the federal government last year, first home buyers have made up about 25 per cent of the home lending market.

These borrowers, who are typically under 49 with less than ten per cent of their own savings in the purchase price of the home, are the most likely to lose their jobs in a recession and default on loans.

The RBS research predicts that banks could suffer more than $1.2 billion in losses as a result.

Source: The Australian