La Trobe Financial has clarified recent changes to its credit policy for off-the-plan properties.
In a statement yesterday, the non-bank lender credit specialist told The Adviser that it has not pulled out of off-the-plan lending for its SMSF product, but has scaled back the LVR for portfolio balancing purposes in relation to this specific product. The maximum LVR is now 60 per cent.
The clarification comes after a referral partner of La Trobe Financial published a pricing and policy update on Friday, which stated: “Please be advised La Trobe Financial will no longer be accepting Off the Plan properties as security for the Non Managed SMSF product. This change is effective immediately however all pipeline deals where an application has already been received will be honoured.”
However, according to La Trobe Financial, other than the LVR cap on its SMSF product, the group has made no changes to its other products that cater for “off-the-plan” purchases.
“We are conscious of maintaining credit solutions for those underserved by the major banks, of which off-the-plan forms a growing part as a large number of projects reach completion,” a La Trobe Financial spokesperson said.
“Another solution we offer that can assist purchasers caught short by the tightening of banks’ criteria in relation to off-the-plan transactions is our P2C product."
La Trobe Financial highlighted recent reports that showed many consumers have signed contracts to purchase an off-the-plan property on the premise that their bank would fund up to 90 per cent of the property value on completion.
“However since then, purchasers have found that banks have reduced the LVR they are willing to offer by 10 to 20 per cent in some cases, leaving purchasers to find the difference which is highly problematic for many who are now seeking assistance from parents, friends or other family members,” the group said, adding that this ‘assistance’ is often by way of a ‘gift’ or guarantee.
“Our Parent to Child (or P2C) loan is in our view a better and safer solution. It secures the family members’ assistance by way of a formal mortgage, and requires the borrower (purchaser) to repay it in monthly instalments under a standard loan contract, effectively giving the purchaser 80, 90 or 100 per cent finance for the transaction depending on the extent of the family members’ assistance.
“The family lender can set the P2C loan interest rate they would like to receive potentially offering an attractive borrower solution.”
La Trobe Financial said it sees its P2C loan option as not only addressing the needs of an underserved market right now (off-the-plan purchasers caught short on bank credit policy changes), but also safely facilitating family members to help a child.
[Related: Off-the-plan purchases 'fraught with danger']