Lenders ramping up bids for market share

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Some banks and credit unions are relaxing their lending criteria in order to attract potential homebuyers in a difficult mortgage market.

SGE Credit Union is now offering borrowers 100% of a property's purchase price - the first time in three years lenders have offered loans with no deposit.

The lender says the new product is aimed at parents wanting to help their children into home ownership.

“The Get Ahead Start home loan option allows parents to use some of the equity in their own home to guarantee part of a home loan taken out by their children. This gives the children the ability to borrow more, or borrow up to 100% of the value of the property plus stamp duty and other upfront costs. It can also help avoid the cost of mortgage insurance that applies to high LVR loans.”

RAMS is also targeting new home owners by axing its application fee until the end of January, saving borrowers $595 in fees, including the valuation fee.

According to financial comparison website RateCity data, 70% of home loans now offer 95% or more of the purchase price.

Spokeswoman Michelle Hutchison told News Ltd that lenders are fighting harder for customers and market share.
However, Choice spokesman Matt Levey says no-deposit loans could tip homeowners into financial distress.

"Just because it looks affordable now, there are a lot of things that can change in the economy and in your life that might make it less affordable in the future.”




  • Jim S on 16/01/2013 10:08:16 AM

    Poor article, but then some of the responses are equally inaccurate.

    Many lenders have been offering family guarantee loans for years. I have personally written them with many different lenders.

    Some lenders will advance 100% of the purchase price with the collateral security provided by the guarantee. In fact, some will also lend more than this to cover stamp duty and other costs, even debt consolidation in some cases.

    These loans are appropriate where the borrowers have very good debt serviceability but little or no savings. Perhaps they are young with little savings but great earning potential. The relationship with the guarantor should be rock solid and the guarantor should be able to understand and financially cope with the possibility of things going wrong.

    The borrowers must have life insurance, loan protection Etc for at least the amount of the guarantee just in case.

    It can be a fantastic way for parents to help their kids get into home ownership earlier than they may have been able otherwise.

    Ps interest only loans will never be banned here, what a load of nonsense. They are entirely appropriate in the right circumstances.

  • GB on 16/01/2013 9:46:29 AM

    The Dood Frank act in the US will see "100%" and "interest only" loans banned. the sooner this happens here in Australia the better. It is "Ponzi" finance pure and simple and should be outlawed...

  • Patrick on 16/01/2013 9:21:57 AM

    Utter claptrap disguised as jouralism.
    Irrespective of the loan amount, it is not 100% if the bank takes additional security in the form of an additional mortgage over the parents' property. Even if the the parents' guarantee is limited the amount secured against the property purchased is no doubt just 80% of purchase price to avoid mortgage insurance. If the borrower can afford the loan at a qualifying interest rate (currently typically 8.00%) then this is a normal loan. In such circumstances I always recommend that the parents lodge a 2nd mortgage (or at least a caveat) over the property purchased to quarantine the equity in that property created by the additional security they provide from any unsecured creditors in the event that their children experience financial misadventure.

  • Country Broker on 16/01/2013 9:12:10 AM

    PLEASE check all the facts first these are family guarantee loans . If 100% loans become generally avaliable they need to be treated with absolute caution ,I doubt if the LMI'S would agree to them anyway, with the property markey doing waht it does .

    There are some target loans offering 100% to certain professions like Medical practitioners .

  • John from Geelong on 16/01/2013 9:11:42 AM

    What a meaningless, uninformed load of rubbish.

  • Barney on 16/01/2013 9:09:48 AM

    What a ridiculous quote from Rate City. "a lot of things that can change... that (might) make it less affordable in the future". Really?
    Maybe people should never borrow money? This comments has nothing to do with borrowing 100% as it could be the same if you borrowed 10%. Obviously a borrower needs to make sure the loan is affordable in the first instance.
    Captain Obvious scores an own goal with this quote. Anything to get your name in the paper....

  • DC on 16/01/2013 9:06:21 AM

    Great attention grabbing headline. Pity the article doesn't really relate to the headline.
    Sounds like "Desperate publisher looking for content for on-line magazine"

  • JohnW on 16/01/2013 9:02:45 AM

    Slow news day?

  • Coast Broker on 16/01/2013 8:57:53 AM

    Really the first time in 3 years that 100% loans with a Family guarantee have been offered by lenders. Who writes these articles? Every broker knows that these products have been offered by most of the majors for years.

Australian Broker forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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