More doors could be open for potential homeowners this year, following a new study into lending criteria by Australia’s financial comparison website
RateCity.com.au The company analysed the loan-to-value (LVR) ratios of home loans and found there are now more than two thirds of home loans with LVRs of 95 per cent and above. This compares to about 50 per cent of home loans two years ago.
RateCity’s chief executive officer Damian Smith says it’s the first time in more than three years that this proportion of home loans offered Australians borrowing power of 95 per cent and higher of the value of a property.
“In early 2008, there were quite a few loans – 21 per cent in fact – that didn’t require any deposit at all. The global financial crisis saw lenders really tighten their belts on mortgage criteria by requiring much larger deposits – so almost all of these high LVR home loans disappeared,” Smith says.
“After a couple of years of really tight lending criteria, things are starting to loosen up again. While there are still no home loans in our database with 100 per cent LVR, many lenders are taking on more risk than they have in the past three years by offering higher LVRs.”
Smith said many lenders have loosened their lending criteria to encourage growth in a slow mortgage market.
“Last year the Australian Bureau of Statistics recorded 536,511 home loans financed in 2011. While that’s slight growth, 11,000 more borrowers than 2010, it’s still the second lowest total number of home loans financed since the year 2000.
“One of the biggest barriers for potential homebuyers is saving for a deposit and the easiest way to encourage more buyers is by offering borrowers bigger loans with smaller deposits.”
Three of the four major banks changed LVRs on some of their home loans this month and now offer 95 per cent, while ANZ continues to offer 90 per cent.