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The Adviser puts the nation’s leading high LVR mortgages under the spotlight
HIGH LOAN-to-value ratio (LVR) mortgages are an essential product for a significant borrower segment. Many borrowers either do not have the capacity to raise a 20 per cent down payment or are unwilling to tie up a large volume of cash in a hefty deposit.
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Before the global financial crisis, high LVR loans at up to 106 per cent of a property’s value were available to some borrowers; today, it is a very different story.
While many lenders have increased their maximum LVRs in recent weeks, according to St George’s general manager for intermediary distribution, Steven Heavey, the days of 100 per cent mortgages are now a thing of the past.
Lending at 100 per cent LVR posed too much of a risk to lenders, he said.
“While Australia’s banks have improved their appetite for risk since the depths of the GFC, I don’t think they will ever be prepared to head back into 100 per cent LVR territory,” he told The Adviser.
St George has, however, re-introduced lending up to 95 per cent LVR for both new and existing customers.
“Quite a few lenders have made the move back to 95 per cent lending in recent weeks and we were determined to be equally competitive in the higher LVR space,” Mr Heavey said.
As part of our regular product review, The Adviser has joined forces with leading data analyst Pisces Group to rank Australia’s leading high LVR mortgages from the major, second-tier and non-bank lenders.
In ranking the nation’s lenders and their high LVR products, Pisces applied a process that considered not only the product specifics – such as interest rates, discharge fees and other quantitative measures – but also the perception of brokers, including their thoughts on servicing times and overall policy.
The seven high LVR mortgages under review comprised:
- Bankwest – Super Start Home Loan
- CBA – 3 Year Special Rate Saver Loan
- Homeside – HomePlus Home Loan
- ING DIRECT – Orange Advantage
- St George – Basic Home Loan - Negotiated
- Suncorp – Back to Basic
- Westpac – Rocket Repay Home Loan
ING DIRECT performed exceptionally well across both broker sentiment and product metrics.
A low interest rate and competitive fee structure helped the lender secure third place in product metrics. In addition, strong broker support pushed ING DIRECT into second place for broker sentiment.
However, the lender finished second overall, pipped at the post by Commonwealth Bank.
CBA performed well across all of the product categories, but it was in broker sentiment that the lender truly shone.
The major won in each category in the broker sentiment section, placing first in credit policy, customer and broker experience.
It’s fair to say that CBA has dominated the high LVR mortgage space for over a year now, with the lender also taking out first position in last year’s rankings by The Adviser.
CBA’s commitment to the broker channel, in the eyes of our experts, is ultimately what catapulted the bank to top position.
CBA’s decision to lift 20 basis points above the Reserve Bank’s movement last November seems to have had little impact on the lender’s popularity with brokers and consumers alike.
A WORD FROM OUR ANALYST….
We’re seeing results that suggest that in high LVR scenarios, second-tier lender products are more desirable than those of top-tier lenders – with the exception of Homeside – as the LMI costs for these lenders are more affordable, says Pisces business manager Sandra Nguyen.
“The more flexibility you want from your product, the more fees end up being charged by the lender,” Ms Nguyen says.
“Typically, products that were more affordable had fewer benefits and almost no features.”
