The number of lenders offering low-deposit home loans has dropped by 44 per cent in the past three years, new RateCity research has revealed.
According to rate comparison website RateCity, 32 per cent of lenders on its database offer mortgages with a maximum loan-to-value ratio (LVR) of 95 per cent, down from 76 per cent in 2015.
RateCity spokesperson Sally Tindall noted that borrowers who typically sought low-deposit loans to break into the housing market may be faced with new challenges amid tighter credit restrictions and reduced appetite for small deposit loans from the Australian Prudential Regulation Authority (APRA).
“For Australians battling to crack into the highly competitive home loan market, low-deposit loans have been a doorway in. But the rules have changed and now borrowers that might have been given the green light three years ago are starting to be turned away,” Ms Tindall said.
Ms Tindall observed that while buyers could have previously paid 5 per cent on a home loan (giving the example of $25,000 on a $500,000 mortgage), they are now required to pay an additional $75,000 in order to qualify for the same loan.
“These new LVR requirements will set a lot of potential buyers back, because they just don’t have access to that kind of money,” the spokesperson said, but added that there are benefits from increased credit scrutiny.
“Stretching yourself thin at record low interest rates can be a recipe for disaster,” the RateCity spokesperson said.
“It’s been over seven years since we’ve experienced a [Reserve Bank of Australia] rate hike and people have become complacent.
“These new LVR rules will sharpen the focus of [borrowers who are] serious about securing housing finance.”
Charbel Kadib is a journalist on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel held roles with public relations agency Fifty Acres, and the Department of Communications and the Arts.
Charbel graduated from the University of Notre Dame Australia with a Bachelor of Arts (Politics & Journalism).
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