Mortgage broking franchise Smartline has warned prospective borrowers to think twice before taking on mortgages over 80%, and said banks are unlikely to further relax LVRs.
Following recent increases to tighter GFC-induced LVR levels, Smartline has said that borrowing above 80% still brings with it "significant additional costs", singling out LMI.
The broker said an LMI policy protects the lender - not the consumer - in the event of a default on the loan, and that the "not insignificant" LMI premium varies "widely between lenders".
Smartline added the amount of money borrowerd above 80% significantly impacted LMI costs.
Managing director Chris Acret said lenders were unlikely to relax LVRs any further beyond the now widely available 90 to 95% level, up from lows of 80 to 85% during the GFC.
“I would expect that this will probably be as high as the lenders will be prepared to go," Acret said.
"The GFC gave lenders somewhat of a fright, and I don’t think there’s many, if any, now who would feel comfortable offering more than 100%,” he said.
Yesterday, NAB Broker announced that it would increase the LVRs to 95% for its entire accredited broking network from 1 January 2012, an expansion of an offer previously reserved for 4-star brokers.
Acret also said that it was mortgage insurers being extremely cautious that is often to blame for why a borrower is refused a home loan over the 80% mark.
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