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.
