105% loans
- Thread starter RickF
- Start date
poor journalism
....................or should that be plagiarism
not much core research in these things, and then they get picked up by another major rag, pretty much verbatim.
There is some more money around with some lenders that had none ( eg WBC) and all of a sudden these isolated things are pushed as a trend.
Even one of our industry rags fell for it the other day...........Adelaide Bank released the news that it was now doing 95 % PI loans again (albeit with a 20 % highe servicing ratio than a 90 % er).
The following few days, all "18" ABL mortgage managers released their version of the same product ,and behold, we have a "raft of new 95 % loan providers"
ta
rolf
....................or should that be plagiarismnot much core research in these things, and then they get picked up by another major rag, pretty much verbatim.
There is some more money around with some lenders that had none ( eg WBC) and all of a sudden these isolated things are pushed as a trend.
Even one of our industry rags fell for it the other day...........Adelaide Bank released the news that it was now doing 95 % PI loans again (albeit with a 20 % highe servicing ratio than a 90 % er).
The following few days, all "18" ABL mortgage managers released their version of the same product ,and behold, we have a "raft of new 95 % loan providers"
ta
rolf
The 105% product is in a pilot testing program. It is not yet available for release to the wider public and I expect there will be limited funding for it for some time. We don't have enough information about it yet to know if it is a legitimate new product or if the devil will be in the detail.
As for the major lenders they are loosening policy in some places and tightening in others. On the 1/1/11 new legislation will take effect for the banks and their policy is almost certain to change, particularly for low doc loans.
I don't expect policies to get significantly more lenient until the banks have more money to lend. We speak to the banks about this regularly and almost all of them have no immediate plans to loosen policy significantly. It is more minor tweaks.
As for the major lenders they are loosening policy in some places and tightening in others. On the 1/1/11 new legislation will take effect for the banks and their policy is almost certain to change, particularly for low doc loans.
I don't expect policies to get significantly more lenient until the banks have more money to lend. We speak to the banks about this regularly and almost all of them have no immediate plans to loosen policy significantly. It is more minor tweaks.
Yes, I see this as good
We are starting to see a softening in the market - a softening of eligibility criteria, as the actual capital and lending markets gradually start to creak open
The GFC was very real and very horrible and is by no means over yet. However, the Australian Residential lending market has stood up well. Throughout this period I don't know of any customer of mine who has had any 'got to sell' moments due to financial difficulties caused by the GFC - but maybe we are all made of tough stuff!
ABL was one of the first lenders to offer 100% Home Loans way back then albeit with specific lending criteria, and have now shown their grit by coming back into the high LVR market ahead of some of the other previously high level lenders
However, although the 100% loans were off the menu for a while (and still are), there has been quite a few lenders still lending at 95%LVR - some including the LMI premium in that ratio and others capitalising to 97%LVR or thereabouts - I think my highest was 97.76%LVR just recently
And not all the high level lenders have required Genuine Savings, so for many lenders it has been 'business as usual' since 2007 and it would appear that the mainstream of the market is now gradually moving that way again as well
There is a lot of whistling in the dark going on about the so-called earth shattering changes due for next year
Um. Well. YK2000 and the Swine Flu were also going to bring the sky down on all our heads. Swine Flu, like the GFC, was and remains a clear and present danger, but YK2000 was a bit of a furphy
From where I sit, lending has a lot to do with personal liberty
If the high level lends are available, there is no compulsion to use funding to that level, but if high level lends are not available, this can impose severe restrictions on people who would otherwise be able to buy their own home
This is a property investment forum. It is easy to think that 'everybody' has a handful of investment properties with equity just there for the taking. But many people rent and have little opportunity to save a deposit, yet certainly have the income to service the loan
So I see high level loans available from a range of lenders as being a good thing as it returns personal choice to the market
cheers
Kristine
I think that's a generalisation. Everyone keeps talking subprime like it was bad here and everyone was doing it, and everyone was borrowing 105%+ of property price and having a ball. That's just not true.
The only people that were regularly borrowing 105% of purchase price, were the ones cross collateralising with their other property, and borrowing 90% or less overall the securities. I think the 100% + market has been over sensationalised, not over borrowed.
The same at 95%, or 97% with LMI. For most institutions this isn't the bulk of their market, it is just prudent risk management to have some loans at the riskier end of the scale, otherwise they are missing out on potential profits.
Default rates are still at record lows, below 1% somewhere, and from talking to other brokers, they quite often find the lower middle class client that borrows 95% of a house in the boondocks somewhere, are quite often the best clients to have. They really like living in their own house, and will beg borrow and steal to make those payments, compared to a mum and pop investor who would more likely sell the investment property at the first sign of trouble.
Plus a bank that lent someone 90% of purchase price 12 months ago in Melbourne, is sitting at about 70% now, are you saying that wasn't worth the risk?
I know this information that you have conveniently omitted from your post will not sit well with your argument, but it is VERY MUCH DIFFERENT here (in Australia) as I posted on this thread some time ago, when having a discussion about the FHBG being not the same as sub-prime:
http://www.somersoft.com/forums/showthread.php?p=516668
Many, if not most, were credit impaired.i.e. they had a bad repayment history to start with.
Yes, but it became a problem when IR's returned to their 'normal' level off the honneymoon rates they signed up at. This was OK when CG allowed refi's to get cash out to make payments but yes, then the GC music stopped and they had to fund real IRs with real money.
No, FHBs are not credit impaired.
Yes they can afford to service repayments (same as rent now anyway) but may have trouble saving up the required deposit.
FHBs for the most part use full doc loans not lo-doc . It is typically investors who participate in lo-doc. They use all sorts of tools available to them to build large portfolios. Even so, lo-docs are a minor % of all loans written.
Maybe. But remember the USA had 16M homes too many. In Aust. we are building 50,000 homes short each year. Demand is different.
Some will, some won't. Remember the banks allow 2% on top of current IR to calculate serviceability. They can fix IRs too.
We don't live in a free market.
Also remember too that many of the Americal loans were non-recourse - we only have those in Australia in SMSF on reasonably low LVR loans, not our general run-of-the-mill mortgages.
Such things have been around for a long time in Australian business.
Chattel mortgages used to be loaned against the GST-inclusive value of the asset used as security ... doh !!!
Cheers,
Rob
