Higher LVR products are ‘creeping in’ to the market, according to Resimac chief operating officer, Allan Savins, who made the statement in a speech at the Australian Securitisation Forum conference in Sydney earlier this week.
According to the Macrobusiness blog, Stephen Campbell, head of credit risk management at QBE’s lenders mortgage insurance business, added that maximum LVRs have reverted back up to 95%, the proportion they were at before the GFC struck in 2008.
The news follows ME Bank’s recent introduction of a 97% LVR cap, which the bank’s group executive risk, Nick Vamvakas, framed as a ‘targeted response’ to a need being expressed by first home buyers.
“We want to give first home buyers a better chance of buying a first home and bring forward the time they need to wait to get into a home,” says Vamvakas.
“We’ve been receiving feedback from brokers that a small increase in the LVR would help many first home buyers to get into the market.”
However, the move towards higher LVR products has prompted local market speculation that Australian regulators may have to introduce measures to cool surging house prices, which are rising largely due to low interest rates.
Campbell, however, dismisses the need for a formal rule in Australia, saying APRA is already liaising with banks about their LVRs.
Furthermore, Digital Finance Analyst principal, Martin North, says the trend is happening across banks – and non-banks - of all sizes.
“The smaller organisations really can’t compete on price because they have more expensive funding, so because there is demand for higher loan to valuation ratios some of the smaller guys feel this is something they can pursue.”