[Benjamin_Dobell]

> * banks should be banned from requiring deposits - this is just a means of keeping house ownership for rich people, so it should be banned

Woh woh woh! Deposits are not a mechanism to ensure house ownership is for the rich. Lending without requiring a deposit is known as irresponsible and/or predatory lending for good reason!

If people can't save a 10% deposit, then they absolutely cannot afford the loan repayments. Locking people into a loan they can't afford is a great way to push people into poverty. Additionally, it leads to people defaulting on loans, without a deposit and/or lender's insurance to protect the bank, then in a market with lots of borrowers defaulting, the bank needs to sell properties at a loss - and well, hello, GFC.

[sofixa]

I don't see what the deposit has to do with loan repayment capacity. You can have a couple with stable good paying jobs, but they must waste money in rent for a few years to be able to save enough for an upfront deposit? Evaluate on their salary and job prospects.

Here in France the deposit isn't a hard %, but banks expect it to be able to cover "notary taxes" ( what you pay to the notary and the state for the acquisition, which is usually in the 2%-8% range).

[Benjamin_Dobell]

> Evaluate on their salary and job prospects.

Salary and job prospects presumably have some correlation with one's ability to repay a loan. However, a much more reliable data point is saving capacity i.e. Income - Expenses. How far your income takes you inherently varies based on the life-style you live.

Does it suck throwing money down the toilet on rent? Absolutely! However, in most (not all) markets, home loan repayments will be quite a bit greater than rental repayments. If someone is unable to pay rent and simultaneously save a deposit - then chances are they aren't going to be able handle the loan repayments.

Also, looking at someone's current salary is not a good indicator of someone's ability to pay off a home loan over an extended period of time. Deposits typically take a while to save i.e. it's not a matter of having a high paying job at one point in time, it's a matter of whether one can sustain their income (keep their job) and budget for an extended period of time (many data points).

Even then - this is only part of the equation. Deposits aren't just a method for banks to assess potential borrowers. Initially banks buy/own the majority of the house (all with zero deposit), not the borrower. A deposit (and often insurance) are required to protect the bank in case the borrower does default - they need to be able to sell without losing money if prices fluctuate. Actually, it's not just price fluctuations. There's expenses involved with selling - agent fees, taxes etc.

An alternative to all this would be to significantly increase interest rates to mitigate the risk - which is also non-ideal.

[MrDunham]

Sorry, it’s early and I’m dumb… GFC? Great financial crash?

If so, then I agree. No money down plus predatory loans combined with some greed for some staggering wealth destruction