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A non-major lender has announced a 97 per cent LVR loan for first home buyers which the lender claims brings it up with the rest of the market.
ME Bank changed its loan to value ratio (LVR) cap for first home buyers this week, claiming the move brings it in line with lenders such as ANZ, CBA, Homeside, ING and Suncorp Bank.
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Nick Vamvakas, group executive for risk, said the change is a targeted response to a need being expressed by first home buyers.
“The move to our first home buyer LVR cap brings us level with other banks already offering a 97 per cent LVR for first home buyers,” he said.
“We want to give first home buyers a better chance of buying a first home and bring forward the time they need to wait to get into a home.”
ME Bank claims that while first home buyers only take up a small section of their loan book, the decision came after consultation with brokers.
“We’ve been receiving feedback from brokers that a small increase in the LVR would help many first home buyers to get into the market.
“ME Bank has historically maintained very high lending standards and the Bank’s arrears are between 15 per cent and 30 per cent lower than the industry average.”
However, some brokers remain sceptical that higher LVRs are what first home buyers need.
Todd Hunter, mortgage broker and buyer’s agent at wHere Group said lenders trending toward 100 per cent LVR was becoming an issue.
“When banks went to 100, 105 and 107 per cent years ago, I was never a fan of them. I think I wrote one or two of those loans all up.
“I think that if you want to own a property then you need to save money for a deposit. How can you show the lender that you have the capability of making loan repayments if you can’t save enough for a deposit?”
The new product comes at a rocky time for high LVR lending, with a number of authorities looking into the practice – including the Australian Prudential Regulation Authority (APRA).
“One area of higher risk that APRA is monitoring closely is [high LVR] housing lending,” chairman of APRA John Laker said last week.
“We will take supervisory action if an [authorised deposit-taking institution] is skewing its housing loan portfolio too heavily in favour of high LVR lending.”
Mr Hunter believes that ME Bank’s new product is to be expected as lenders compete over the booming housing market.
“There’s always that thirst for competition and market share among the lenders, and they certainly will jump into this high LVR space,” he said.
