Lenders are increasing the amount they are willing to lend borrowers, which will no doubt be good news for many first time buyers.
Several non-bank lenders announced the reintroduction of higher LVR (loan-to-valuation ratio) home loans today, including Homeloans Ltd and National Mortgage Company.
These groups will now lend borrowers up to 95 per cent of the purchase price on a property.
In other words, first time buyers may now be able to get into the market with just a five per cent deposit – rather than the 10 or 20 per cent often required by the major banks in the current market.
I can almost hear a collective sigh of relief from here.
For most first time buyers this could make a significant difference between getting into the market now or in a year or two’s time.
If you take a property worth $350,000, for example, a five per cent deposit equates to $17,500, compared to $35,000 for a ten per cent deposit.
High LVR loans have effectively disappeared from the home loan market since the onset of the global financial crisis as a result of lenders’ funding lines freezing up and their appetite for higher risk lending decreasing.
“There has been a real shortage of home loan options in this space in recent times,” Homeloans Ltd general manager of third party sales Tony Carn said.
Borrowers should remember that the higher the LVR on a property, the higher the lender's mortgage insurance premium they'll need to pay.