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The Adviser puts the nation’s leading low doc mortgages under the spotlight
LOW DOC mortgages remain a key product for Australia’s lenders and an essential one for the self employed, those with variable incomes and borrowers who do not meet the requirements to secure mainstream finance.
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While the global financial crisis effectively managed to push some lenders out of the low doc space, a number remain and continue to offer truly competitive products.
A majority of these lenders also appear to have relaxed lending criteria in the last 12 months, as liquidity in the market increases.
Just as some lenders have relaxed their criteria, however, so others have preferred to take the hard line approach.
ANZ, for example, does not like to lend to low doc borrowers with an LVR greater than 60 per cent, which hurt their overall position in The Adviser’s ranking.
To analyse the overall results, The Adviser once again called on its broker panel and data analyst partner Pisces to rate and rank Australia’s leading low doc mortgage products.
In ranking the nation’s lenders and their low doc 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 low doc mortgages under review comprised:
- ANZ – Lo Doc Standard Variable Rate Loan
- Bankwest – Easy Doc Home Loan
- CBA – Low Doc Rate Saver Loan
- Homeside – Low Doc HomePlus Home Loan
- St George – Low Doc Home Loan Variable Rate
- Suncorp – Premium Low Doc Back to Basics
- Westpac – Low Doc Rocket Repay Home Loan
CBA was the standout performer for the second year running.
Last year, the bank performed strongly over both assessment areas; placing second in product metrics and broker perception.
And the results were much the same this year.
The lender tied for first position with ANZ in broker perception and placed second in product metrics – helping it to secure top position overall.
While ANZ performed very strongly in broker perception, however, it failed to hit the mark in terms of product metrics, coming in last.
Despite that result, ANZ still managed to secure equal second place overall, as broker perception is given greater weight when working out the final ranking.
The lender tied with Homeside, which performed exceptionally well across product metrics, placing first in this area for the second consecutive year.
But just like last year, Homeside’s overall ranking dropped as a result of poor broker attitudes towards servicing and support.
Only two points separated the scores for first and second places.
Overall, the results largely mirror last year’s ranking, with the exception of Westpac, whose performance dropped from second place last year to fifth in the 2011 ranking.
This result comes as no surprise, however, given that the lender raised its interest rates by 45 basis points in November – 20 basis points above the RBA.
A WORD FROM OUR ANALYST….
Based on The Adviser’s product review, top-tier lenders appear to be the more favoured as their policies and pricing structures are more accommodating and competitive
Products that require the least amount of documents are normally associated with a higher cost. This is to compensate the lenders for the additional risks that the borrower may default during the life of the loan.
The results suggest a significant difference in the product rankings when loan-to-value ratio policies are taken into consideration. ANZ’s lo doc product was among the favourite, given a scenario of LVR up to 60 per cent. However, their inability to service above the LVR of 60 per cent with low doc has placed them in a disadvantaged position. Although this is the case, like Homeside, their low doc products are more policy focused and not product focused unlike the other lenders.
BROKER COMMENT
Chris Staats, broker with Seek Home Loans, says while Homeside might not be every broker’s favourite lender, given their current turnaround times and the level of broker support they provide, he says the lender’s product is the best in the market in terms of policy.
“Homeside is definitely my first choice for low doc. The lender does not differentiate products from full doc to low doc,” Mr Staats says.
“That is to say, Homeside’s products can all be made into low doc provided the borrower meets the necessary policy requirements first. There is no pricing differential.”
