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MFAA Prosper : Mortgage and Finance Brief 05
Many lenders slashed their maximum LV Rs to below 90% during the global financial crisis and tightened other lending criteria, but some are now unwinding those restrictions. In July and August, a number of lenders, including Homeloans, BankWest, Macquarie Bank, ANZ and Adelaide Bank (and mortgage managers that are funded by these lenders such as Better Choice Home Loans), raised their maximum LVRs. “That’s definitely a trend we have noticed over the last month or so,” said Kristy Sheppard, Senior Corporate A ffairs Manager at mortgage broker group Mortgage Choice. “There are a number of lenders on our panel that have increased their maximum LVRs.” Sheppard said the trend of rising LVRs – which means borrowers need less cash to buy homes – is likely to continue. “ We won’t get back to having the days of 100% and 105% home loans, which is probably a good thing,” she said. “But I would say lenders are determined to be more competitive and in doing so they will start to bring in more product innovation and loosen their lending criteria.” The rise in LVRs comes as some local lenders gain confidence in the recovery of the Australian and global economies. “There has always remained sufficient borrower demand coupled with a renewed LMI (lenders’ mortgage insurance) appetite for higher LVR loans,” said Allan Savins, Chief Operating Officer of wholesale funding provider RESIM AC. “However, this appetite differs from that of investors like AOFM and some warehouse providers who have weighted LV R requirements. “This explains the mixed attitudes because it is really a balancing act dependent upon the funder’s circumstances.” Good news for brokers Mortg age brokers say the rise in LVRs is good news and wil l i ncrease the flow of loan volumes. “It means more loans getting approved and it means clients being happier with the products we can deliver for them,” said Nick Caple, Director of Melbourne-based independent mortgage broker Choice Capital. However Caple said he was not seeing LVR increases on low doc loans. Better Choice, for example, increased its maximum LVR to 95%, but the increase doesn’t apply to low doc loans. Adelaide Bank’s increase in maximum LVR from 90% to 95% also doesn’t apply to its low doc product, SmartDoc. Riskier books? The higher LVRs don’t necessarily translate to riskier books for lenders, according to Paul Caputo, Acting Chief Executive of lenders’ mortgage insurer Genworth Financial. “Do I think that in the current environment that these borrowers will be more risky? The answer is no,” Caputo said. “Often what we see driving claims and hardships is unemployment, underemploy ment and interest rates. “We’re going into a period where unemploy ment has improved ... I think the economics are actually favourable to support some improvement in the level of hardships over the next 12 months.” He added that lenders’ checking practices were strong enough to support higher LV Rs without necessarily exposing them to higher levels of risk. Lenders increase LVR ratios Mortgage brokers are becoming increasingly upbeat about home lending volume growth after a number of banks and financial institutions increased maximum loan-to-value ratios (LVRs) on home mortgages in the past few months. Words Ben Power and Roslyn Atkinson “(Lenders) will start to bring in more product innovation and loosen their lending criteria.” “It means more loans getting approved and it means clients being happier with the products we can deliver for them.” Kristy Sheppard, Mortgage Choice. 12 | Mor tgage & Finance brief News
Mortgage and Finance Brief 06