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Reduced LVRs could hit borrower demand

Staff Reporter 2 minute read

A tightening of maximum LVRs from lenders could clash with the rising demand for higher percentage loans as first home buyer and refinancing activity pick up.

AFG’s November Mortgage Index released on Monday showed average LVRs rose 10.4 per cent in the year to November from 65.2 per cent to a new high of 72 per cent.

Mark Hewitt, AFG general manager of sales and operations, accredited three drivers to the increase in the average LVR – the obvious rise in first home buyer activity as well as increased refinancing business and lower property prices.

But while demand for high LVR products may be on the rise, access to higher LVR products is tightening.

Just last month ANZ announced it would reduce its maximum LVR from 95 to 90 per cent while the Commonwealth Bank reduced its maximum LVR from 100 to 95 per cent.

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NAB also told Mortgage Business last month its high LVR lending criteria was under review with some “risk-based adjustments” anticipated in the future.

Mr Hewitt said any further LVR changes could pose a risk to first home buyer activity.

“The real danger is that we have almost counteractive forces at play. On the one hand we have the Reserve Bank and government trying to stimulate activity but on the other lenders are tightening criteria,” he said.

While Mr Hewitt said the recent reduction in LVRs and tightening of policies hadn’t inhibited a return of first home buyers yet, “further policy revisions could be detrimental”.

AFG’s first home buyer sales recorded a 120 per cent increase between August and November this year, off the back of reduced lending rates and the government’s first home owner boost.


Reduced LVRs could hit borrower demand
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