Low-doc loans making a comeback, analysis reveals

by Julia Corderoy09 Sep 2015
Low-doc housing loans are making a comeback after several years of caution following the global financial crisis, research has revealed.

According to a report from the Australian Financial Review, an analysis by ratings and comparison site Canstar has revealed there are now about 60 low-doc products being offered by nearly 20 lenders, including the big four banks, compared to 2000 when low-doc loans accounted for less than 1% of the products on offer.

Justine Davies, finance editor for Canstar, told the AFR that the interest in low-doc lending has been renewed as regulators are satisfied that lenders have lifted their game. Irresponsible lending by low-doc lenders is the US is blamed as a major contributor to the global financial crisis.  

Davies also said the attraction for banks is the higher profit margin as a result of the increased level of risk.

According to the Canstar analysis, a standard variable low-doc loan will be 0.53% more than a full documentation loan. The average difference is about 0.4% on a three-year fixed loan. In addition, initial fees are, on average, about $340 higher on a $350,000 residential loan at 60% LVR. 

COMMENTS

  • by Regional Broker 9/09/2015 8:52:48 AM

    Many of these loans are not genuine Lo Doc products and still require a degree of financial information, such as 12 months bank statements of BAS statements. Also LVRs are much lower than pre-GST.

  • by Broker 9/09/2015 10:32:22 AM

    I don't think the AFR have much idea as to what the real situation is. Perhaps they get their information form APRA or ASIC!

  • by Vincent Moore 9/09/2015 5:16:19 PM

    I hate doing low doc loans. The consumer still thinks it's like the old days whereby if you had an abn even for one day, it was a case of sign this one form and here's your money!

    It's far from being that easy and once you ask for a letter from their accountant, BAS statements, trading statements etc. many clients vanish.