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Lenders loosen criteria

by Staff Reporter11 minute read
The Adviser

Staff Reporter

Australia’s banks have continued to loosen their credit criteria in a bid to entice potential buyers.

Recent data from RateCity found there were over 40,000 fewer first home buyers in the last 12 months compared to the average of the last 4 years.

And, according to RateCity’s chief executive Damian Smith, lenders are now trying to kick-start the sluggish mortgage market in three main ways.


"There are three things lenders can do in the absence of a rate change from the Reserve Bank. First, they negotiate on rates and fees – we’ve seen ads from the big four showing their willingness to negotiate variable rates, and we think many borrowers should be able to get variable rate loans well below 7 per cent,” he said.

“Second, they’re continuing to cut fixed rates. The average 3 year fixed rate is now 6.62 per cent, versus 7.38 per cent in July this year, with the lowest at 6.25 per cent.

“But finally, they’re also proving willing to lend to people with less deposit or equity, by increasing the 'loan to value ratio' (LVR). This means many more potential borrowers are 'eligible' for loans than might have been the case just 12 months ago.”

Mr Smith said almost 70 per cent of home loans in its database now offer up to 95 per cent of a home's purchase price.

"All major four banks now offer home loans with up to 90 per cent LVR while Commonwealth, NAB and Westpac also offer up to 95 per cent LVR on some of their home loans,” he said.

But QBE LMI's chief executive Ian Graham said increasing the maximum LVRs was not the way to go.

"I don't think we will ever see a return to 100 per cent LVRs," he said.

"Instead, as the banks desire for market share grows, we will see increased segmentation of product."

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