PRODUCT RANKING -- High LVR mortgages1774 people have read this article
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| Friday, 26 February 2010 |
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High LVR mortgages are an essential product for a significant borrower segment that either do not have the capacity to raise a 20 per cent down payment or are simply unwilling to tie up cash in a hefty deposit. Last decade high LVR loans peaked at as much as 106 per cent of the property’s value however it is a very different story today. Events of the last few years have largely dictated how banks have priced and structured their products. ANZ was the first major bank to dramatically reduce its maximum LVR, sending a shock wave through the industry, retreating to 90 per cent back in November 2008. Since then there have been widespread revisions to LVR policy across the board, the most recent move coming from Westpac when it cut its top LVRs to 87 per cent for new business in January this year. A diminished appetite for risk and tighter funding has led to tighter policies from most lenders as a bid to preserve funding in what is still a very lean time. A simple tool to achieve this is a tougher stance on maximum LVRs. In many instances even where higher LVRs may be available this privilege is reserved only for existing customers alone. The global financial crisis is still stifling liquidity; as markets stand today it would appear that there is still some time to come before the mainstream banks push LVR limits upwards. Notwithstanding this, there are some competitive products on the market. Some banks still offer as much as 97 per cent loans and a recent renaissance in the non-bank sector has seen several mortgage managers launch 95 per cent products to the third party channel. In this regular bi-monthly ranking we consider the high LVR mortgages put forward by our broker panel, rating each product on policy, interest rates, servicing times, broker support, fees and also product availability. In ranking the nation’s high LVR mortgages we applied a robust process that considered not only the product specifics – such as interest rates and discharge fees, with analysis provided by Pisces – but also broker perception, including their thoughts on servicing times, overall policy and how well lenders supported them. The methodology engaged was consistent with previous rankings to produce a holistic view of lenders’ products. The eight high LVR mortgages for consideration for this ranking included:
ANZ – Standard Variable Home Loan Max LVR 90% Bankwest – Lite Plus Home Loan Max LVR 95% CBA – Standard Variable Rate Loan Max LVR 97%* Homeside – HomePlus Home Loan Max LVR 95% ING DIRECT– Orange Advantage Max LVR 90% St. George – Standard Variable Rate Loan Max LVR 95%* Suncorp – Standard Variable Rate Max LVR 95% Westpac – Rocket Repay Home Loan Max LVR 97%* * For existing customers STANDOUT PERFORMER CBA performed strongly over both assessment areas: product metrics and broker perception. Indeed, it was a clear leader, topping broker sentiment and taking the second position for product metrics. The lender scored particularly well for overall policy, broker support and servicing times – which helped secure the overall top placing on the ranking. There’s no dismissing CBA’s strong market share as a key driver for its results in the ranking. While it did not secure any top rankings for product metrics, it was a consistent performer, which when added with its strong broker sentiment results, helped elevate it to top position. Homeside, while performing well across product metrics – where it ranked number one – failed to score well with brokers on product availability, servicing and support and accessibility. This proportionately pushed its ranking down despite a heavier weighting applied to product in the ranking. At the number two slot, it’s still a solid performance –illustrating the strength of the product but its lack of traction with the broker market. The upper tier of the ranking was overall tight, with little separating the second, third and forth ranked lenders. SPLITTING THE FIELD Flexibility to LVRs was obviously a key product differentiator – even though lenders had good rates, support and service. The scenarios applied by Pisces included assessing products on two scenarios: $250k at 90 per cent LVR and $450k at 97 per cent LVR. According to Vincent Turner, general manager of Pisces, some of the products were not even able to complete across the two scenarios as a result of LVR. “Most were competitive overall in features and fees, however rates varied quite highly between the products compared, especially when taking package discounts into effect,” he says. ING DIRECT, Bankwest and ANZ all performed poorly in comparison to the other lenders in terms of the borrower scenarios. Alternatively, Homeside, St. George, Westpac and CBA performed strongly across both. Regardless of the challenges to LVRs, it would appear that competition remains tight across lenders SVR products. As liquidity returns to market, as is expected over 2010 and into 2011, competitiveness should continue to create strong offering for brokers and customers from the nation’s lenders.
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