End of 90% IP home loans?

Hi Everyone,

I went to see my new mortgage broker yesterday (Mr Ed for anyone's who interested) and he mentioned that he wouldn't be surprised if in a year or so the banks ended offering 90-95% IP loans and went to the NZ standard of maximum lending of 80% for IP purposes (sorry if I've misquoted you Ed, this is what I understood anyway).at 90%

What do you guys think of this? Should I worry that I'll only possibly have the money to fund one of my IP's on a 90% loan?
 
If true that'll put a real damper on my plans. I like to use minimum to get into deals.

However, wouldnt there be pressure from the multiple LMI suppliers in Australia since it'd put them out of business?
 
My folk economics understanding of the Global Financial Crisis and its aftermath is that banks have a shortage of credit that they can provide, along with a sudden risk aversion when they realised that they might have made some bad calls.

During 2007 it was possible to get a mortgage for 115% of a property's value in the UK. (That was offered by Northern Rock, and their lending practices were so crazy that they were the first to go under.)

Over the course of 2008 and 2009 the maximum amount that the banks would lend dropped, and getting more than an 80% mortgage was difficult, and the best deals were available of those wanting to borrow 60% or less of a property's value.

Things have been improving recently, and 90% mortgages without eye-gouging rates are starting to reappear.

There are a number of anecdotes on Somersoft that lending is tightening up, and it feels a bit like the UK did in 2007 or 2008. If Australia's following the same cycle then I'd expect to see the banks become increasingly risk averse over the next year or two, and things like 90% mortgages disappear for a time.

A lot will depend on the wider economy too. During 2008 house prices in the UK fell by something like 20% which was too much for a nervous banking sector that had just had a near-death experience. Australia hasn't had the same problems, so things might play out differently.
 
Possible, hard to gauage at this time

Certainly the trend of LVR edns for new to bank clinets have slowed.

The LMI providers are still willing to underwrite the risk, the issue is that some of the lenders are NOT. Why lend to someone at 95 % when you have a choice to lend to others at 70 or 80, and you only have a limited amount to lend ?

ta
rolf
 
These things go in a cycle as lenders become more cautious and then after a few years as memories grow dim someone relaxes their guideines so they can get more customers.

The major concern is that if lending becomes restricted this will impact on prices as less competition occurs.

It's less than 20 years since banks charges a higher interest rate on residential IP lending than they did for PPORs.

It wouldn't surprise me if we're nearing a second wave of businesses having problems as the wording of more ads in the regional city editions of domain I have looked at this week is indicating a higher proportion of "must sell" ads than has been in those papers since early 2009.
 
These things go in a cycle as lenders become more cautious and then after a few years as memories grow dim someone relaxes their guideines so they can get more customers.

The major concern is that if lending becomes restricted this will impact on prices as less competition occurs.

It's less than 20 years since banks charges a higher interest rate on residential IP lending than they did for PPORs.

It wouldn't surprise me if we're nearing a second wave of businesses having problems as the wording of more ads in the regional city editions of domain I have looked at this week is indicating a higher proportion of "must sell" ads than has been in those papers since early 2009.
 
Top