Banks have begun denying funds to homeowners that are looking at upgrade and move to a bigger home. The Daily Telegraph has reported that banks are denying homeowners from bridging finance, the process where a bank offers intermediate loan that finances the purchase of a new property while the existing property is sold.
In the past, a common strategy for people looking to relocate, was that they would take out a bridging loan to buy their new property, while their existing property was up for sale. Banks are now claiming that bridging finance can produce bad debt, while some other lenders don’t even offer the product.

This position by banks may be contributing to the decrease in the property market, by delaying purchases, and forcing home owners to sell their homes before buying a new one.

This new stance may have come about for a number of reasons, some possible reasons are the relatively static property market, and that the banks are essentially issuing a second mortgage on the first property and they have no security to attach the mortgage to.

Mortgage Choice broker John Manciameli said the banks’ aversion to bridging finance may be due to the fact Sydney homes are taking a lot longer to sell, elevating the lenders’ risk profile into alarm-bell territory.