Brendan Burgess
Founder
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New research from the Central Banks suggests that the default rate is about 1/3rd less, when they control for LTI and LTV and other factors. (14.9% of second and subsequent buyers default compared with 10.3% of FTBs)
In other words, First time buyers who bought a house in 2006 on 4 times income and 90% LTV over 30 years are less likely to default than second and subsequent buyers who bought a house in 2006 on 4 times income and 90% LTV over 30 years
[other researchers] ... cite a number of reasons why this might be the case.
Firstly, it may be that, due to a lack of credit history, banks apply more thorough lending evaluations and stricter appraisal criteria to FTBs.
This may lead to better credit allocation outcomes.
Second, if FTBs wish to move in the future and are concerned about the impact of default on their future credit access, they may be more active in trying
to keep up with mortgage payments.
Thirdly, becoming an SSB may infact reveal a higher tolerance for risk relative to borrowers who remain as FTBs. This increased risk appetite may lead to
higher probability of default for SSBs.
New research from the Central Banks suggests that the default rate is about 1/3rd less, when they control for LTI and LTV and other factors. (14.9% of second and subsequent buyers default compared with 10.3% of FTBs)
In other words, First time buyers who bought a house in 2006 on 4 times income and 90% LTV over 30 years are less likely to default than second and subsequent buyers who bought a house in 2006 on 4 times income and 90% LTV over 30 years
[other researchers] ... cite a number of reasons why this might be the case.
Firstly, it may be that, due to a lack of credit history, banks apply more thorough lending evaluations and stricter appraisal criteria to FTBs.
This may lead to better credit allocation outcomes.
Second, if FTBs wish to move in the future and are concerned about the impact of default on their future credit access, they may be more active in trying
to keep up with mortgage payments.
Thirdly, becoming an SSB may infact reveal a higher tolerance for risk relative to borrowers who remain as FTBs. This increased risk appetite may lead to
higher probability of default for SSBs.