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Recent reductions to lenders’ maximum LVRs have sparked concern among brokers that the days of high loan to valuation products could be numbered.
The majority of the 859 respondents to Mortgage Business’ latest weekly straw poll said they expected maximum available LVRs to be in the 90s – 37 per cent tipped maximum LVRs of 95 per cent while 28 per cent said 90 per cent would be the maximum offered.
Just 14 per cent of respondents said they expected 100 per cent products to be available by 2010 while a substantial 20 per cent of respondents feared the maximum available LVR would fall below 90 per cent.
These concerns come as lenders continue to tighten up on higher risk lending. In November ANZ reduced its maximum LVR to just 90 per cent while the Commonwealth Bank has reduced its maximum LVR from 100 to 95 per cent.But while momentum is moving towards lower LVRs RAMS head of broker business Clive Kirkpatrick is confident the market for 100 per cent products remains strong – though he admitted it was difficult to predict what the future would bring.
“There continues to be a steady demand for 100 per cent LVR loans,” he told Mortgage Business.
RAMS is one of the few lenders that continues to offer borrowers 100 per cent LVR loans with mortgage insurance for full-doc products.
Mr Kirkpatrick said significantly higher property prices and lifestyle changes were key drivers for the ongoing demand for the products.
“It is important to recognise average property values... have significantly increased over the last decade.
“Lifestyle changes have meant people no longer start saving for a home loan when they leave school,” he added.
Alison Whittle, director of operations at Tiffen and Co and The Mortgage Detective, agreed that higher LVRs would remain a viable product.
“While the market continues to struggle I think we’ll continue to see a squeeze on LVRs but I would expect by 2010 the market would have turned around. These things are quite cyclical and don’t last forever,” she said.
Broker Paul Woodley of Woodley Loans was also confident that as long as they were priced accordingly “there will always be a market for higher LVR products”.
“We operate in a very reactive industry and I think LVR reductions are just a reaction to current market conditions that I’d expect to change again.”
While maximum LVRs of just 90 per cent could be a problem Mr Woodley said 95 per cent maximum LVRs weren’t necessarily a bad thing.
“For first home buyers you’ve got the first home owner grant and stamp duty reductions. And there’s nothing wrong with encouraging first home buyers to save a small deposit.”
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