Credit Market Impact on Lending LVR

[TJamesX]

Anecdotal evidence:

Was having a chat to a friend of my brothers the other day. He works in securitised debt for an Aus bank. Suffice to say he is in the thick of it..... Deal flow has stopped completely and wholesale funding market collapsed (but everyone knows that).........

however he did make an interesting comment, apparently one major is looking to restrict all new lending to 80% LVR, and he thought all others would follow. Combine this with wholesale funding being dead (which is approx 30% of the mortgage market), then lending into the property market in Aus will contract significantly... IMO there would be very little chance that property will escape relatively unscathed if this was to eventuate.

I don't know if any of the mortgage brokers can confirm any of this with their day to day dealings with the banks???

TJ

 

[tigerGT]

Anyone who thinks that property will go through this without being affecting is kidding themselves. I am a property owner and looking for 3rd IP. The problem i face is that I know that property will fall by around 10-15% (my views) in the next 18 months however thre is a house I want to buy in 2 weeks time(auction). what to do... what to do...

 

[Peter_Tersteeg]

There hasn't been a real effect on LVRs with most lenders, but it has affected pricing for the mortgage mangers quite drastically. A few types of loans such as no docs have lowered their LVRs and the 90% lo doc doesn't exist any more.

Lenders who are fully securetized aren't competitive any more, but those who operate off a deposit base are.

Frankly I just don't see any of the majors only lending to 80%. A few lenders have even noted that the LMI loans tend to be more profitable for them. Stopping at 80% would destroy the first home buyer market completely. There are substantial numbers of developments which rely on this market and the economic effects would be substantial.

There's still some good fundamental reasons (limited supply, high demand, lowering cost of ownership, increasing rental returns) of why well located properties will continue to climb in value. Some have predicted massive increases over the next few years in good areas.

 

[Token Funder]

Frankly I just don't see any of the majors only lending to 80%. A few lenders have even noted that the LMI loans tend to be more profitable for them. Stopping at 80% would destroy the first home buyer market completely. There are substantial numbers of developments which rely on this market and the economic effects would be substantial.

In fairly short order the Four Pillars will have close to 90% of the resi lending in Australia.

At that point, what is the incentive for any of them to spend much time at the higher end of the risk curve?

Personally, I wouldn't rule out a significant lowering of LVRs at all.