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Aggregator limits LVR in light of APRA directive

housesandmoney

housesandmoney
Lucy Dean 1 minute read

Connective Home Loans has followed in the footsteps of Australia’s big banks, announcing changes to maximum loan-to-value ratios (LVR) for interest-only home loans.

The change, effective from 10 June, follows a crackdown on interest-only loans by the Australian Prudential Regulation Authority (APRA) in March.

Under the new measures, authorised deposit-taking institutions (ADIs) are to limit new interest-only lending to 30 per cent of all new residential mortgage lending.

As such, Advantedge, Connective Home Loans’s white-label funder and part of NAB Group, is now asking new customers to demonstrate LVRs for interest-only loans of at most 80 per cent.

The aggregator-owned home loans business also announced a revised maximum LVR of 90 per cent for vacant land and construction loans. The maximum LVRs are inclusive of applicable lenders mortgage insurance (LMI).

Connective Home Loans said the change was necessary to ensure continued responsible lending but that existing applications submitted by close of business on Friday, 9 June will be honoured.

Also effective from 10 June, CBA will put into action new limits on LVR for new interest-only loans. The bank will be reducing the maximum LVR from 95 per cent to 80 per cent for owner-occupied while new investment home loan applications will be required to establish a maximum LVR of 80 per cent, where it used to be 90 per cent. 

For ANZ borrowers, the changes will come into place on Monday, 29 May as new borrowers looking at an interest-only loan will be allowed a maximum LVR of 80 per cent for both owner-occupier and investment lending.

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Over at Westpac, prospective borrowers have been experiencing the LVR cap since May 15 when new owner-occupied interest-only loans were limited to LVRs of 90 per cent.

Marking the changes, Connective Home Loans said: “As always, it is important that customers are provided with product solutions that are in line with their needs, and it is often the case that a principal and interest loan may be the most suitable arrangement.”

[Related: Aggregator asks regulator to ‘watch’ big banks]

Aggregator limits LVR in light of APRA directive
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