The return of the high LVR mortgage

From News.com.au:

MULTIPLE lenders have eased requirements on borrowers’ deposit sizes making it easier to buy a home…

New data from comparison website Finder.com.au shows lenders including Homeloans, HSBC, loans.com.au, Macquarie Bank, RAMS and Westpac have moved their LVRs on some mortgage products, relaxing the size of the deposit needed to secure a loan…

Finder.com.au spokeswoman Michelle Hutchison said borrowers who had small deposits and were taking out a loan at a time when interest rates were at record lows was a “recipe for disaster”…

According to the financial comparison site, almost half of all home loans on their database had a maximum LVR of 95 per cent or higher.

This rise in high LVR lending of course comes at a time when investor mortgage lending has surged to unprecedented heights, whereby nearly one in two new mortgages are going to investors (see next chart).

ScreenHunter_6083 Feb. 16 09.43

Regulators have been debating whether to implement macro-prudential controls on high risk mortgage lending for nearly two years now. Seriously, how much more evidence do they need that housing speculation is out of control?

Get off your arse APRA, do your job, and curb this fiasco before it takes the economy down.

[email protected]

 

Comments

    • It is quite funny.

      1. Low interest rates.
      2. No prudential regulation.
      3. High LVRs.
      4. Interest only loans.
      5. Low doc loans.
      6. No policing of foreign investment
      7. Leveraged investment through SMSF

      What could possibly go wrong?

      • You have to ask yourself, is this deliberate or just really really bad mis-management? It’s almost too perfect a storm to have not been manipulated and created by those that benefit most from it.

        The only thing not funny is that as a tax-payer I’ll be bailing it out when the time comes and sadly I’ve not benefited at all from rising property prices. Far from it….

        Democracy works mate!

      • heh.. Exactly. And yet I am constantly told I am a big worry wart and “Austraylia doesn’t have sub prime loans”…. “Housing can’t go down as we have full recourse loans here” and other moronic excuses.

        Yeah.. right.

      • @ Gavin

        it deliberate, of course!

        and everyone knows where it leads … big bankers know that and that’s why they are leaving (3 of 4 big 4 lost their CEO in last 6 months)

      • Locus of Control

        Response to DarklyDrawl.

        Re. “Australia doesn’t have sub-prime loans”.

        A friend of mine (background: aged mid-40s, no job at present (has worked in past), no discernible savings (in fact, $10k cc debt last i asked), currently a carer of their elderly mother, only income at present a carer’s pension & occasional rent from a studio apartment holiday rental) recently divulged they’d borrowed a full ~$300k (C’wealth Bank), no deposit down, for an investment property (2 bed apt). The property is currently tenanted, but my friend can’t afford the payments if the tenants move out. Hmmmm…. “Australia has no sub-prime”. BS

        Mind you, an anecdote does not a disaster make. But I’m sure there’s more like my friend out there.

    • I have practically zero confidence that APRA is going to do anything that would potentially adversely effect the bubble.

      The asset bubbles we have in this country are now literally the only game in town, anything and everything will be sacrificed in order to maintain them.

      We have unemployment still below long term trend averages, we have growth in the economy despite it being anemic compared with long term averages, yet despite everything going relatively smoothly on paper (I emphasize the on paper part) we as a nation require below inflation interest rates just to make the cost of our housing bubble in any way manageable.

      • Yes, I can imagine that given rates are still falling. I think the risk is when interest rates creep up.

        Doesn’t take much of a rise to go from $3000 per month mortgage payments to $5.5K and some serious costs cutting.

        I also worry for those folks who have PPOR interest only loans (I personally know a few of them). If prices fall and rates go up you can get into neg equity real fast.

      • I’m late to the party – busy day.
        I’ve not noticed any change in lenders attitudes and IMHO they are still pretty fussy.

        In the end it doesn’t matter so much whether the lender wants to write 95% loans because it’s the mortgage insurers decision, and they are very tight.

        This is nothing more than a beat up based on an internet search result released as news by a group looking for media attention.

  1. “Get off your arse APRA, do your job, and curb this fiasco before it takes the economy down.”

    Are you suggesting that APRA should invent a time machine?

    • +1 haha

      I am so looking forward to the decision makers being judged for their actions (and decisions to not act). May the tar stick for the rest of their lives.

      • Frederic Bastiat

        It wont stick!! Bernanke got bloody Time Man Of The Year!!! Even though he said the housing market was not in bubble territory!

        There is no accountability…they are probbaly invested in the market and they will probably short the market when its just about to crash.

        Nothing surprises me any more

    • No APRA, stay where you are … the market is helping people create wealth … something these beatniks are so unaccustomed to they could not recognise it … that’s the real problem here.

      • ” the market is helping people create wealth”

        Nope. It is mostly the illusion of wealth – a very different thing.

        I am all for folks taking ponying up the dollar and taking a risk, but it seems a lot of folks I know don’t understand the risk. Indeed, they think there is no risk. But hey…. Each to their own.

      • Create wealth…seriously?

        Instead of investing in engineering, manufacturing, tech ,ag, etc, we are putting our eggs in the residential property basket, and you call it wealth generation?

      • [email protected]

        put your money where your mouth is uptown .
        load up and don’t stop.

  2. Channeling reus here……

    Since the economy is now just houses, the RBA and APRA are doing exactly the right thing….supporting the ‘economy’….

    What part of that don’t you buggers get?….do ya job….don’t do ya job….do ya job………hahahha

    • Yeh Mate .. .you like me = we know when to go out and make money…. rest of the bunch here so unaccustomed to making money, they can’t see the signs.

      Doodsayers, Prophets of Doom, Doomsday Preppers these beatniks

  3. Is this what tony Crapbot meant when he declared government needs to get out of the way of business.

  4. It’s funny, i didn’t realise these sort of loans actually went away in the first place.

    When i checked a few years ago (post GFC), i’m sure there were still non-bank lenders still offering 100%+ LVR loans.

    Besides, what does it matter, they’re covered by LMI (sarc).

    • Lots of things you not recognising … like how and when to go out and make money ….. been so long ago probably, and everything you went into went bust … so now you just think it has to happen again .. shame.

      • Does it feel good to make money at the expense of a fellow aussie wanting to buy their own home? You do realise your action prevents this happening right.

  5. This isn’t getting better, this is an absolute disgrace…

    I know alot of people on Macro Business are sitting here on the sidelines cheering and hoping that it all collapses so they can potentially buy cheaper or for whatever motive…heck if property collapses (or should I say WHEN) I stand to benefit myself….

    But the truth is, this country is being set up for a situation that could destroy our standard of living for a generation…

    And the sad thing is, a fair bit of that pain could have been avoided…it now seems inevitable…

      • “but no one could possibly see it coming !!!”

        Byers, Stevens, Laker, they’ll all be given their chance to explain away their responsibility.

        They should be strung up by their nuts in the town square.

    • Frederic Bastiat

      What are we supposed to cheer? A continuation of the bubble..a slow moderation of prices through MP, which causes resources to be misallocated for another 10 years and no lessons learnt!?

      Of course I hope there is a crash and a world of pain.

      I hope the regulators, speculators, RBA, Government, media, RE Agents, banks and brokers take an absolute bath. That is a just outcome and for the long-term it is the outcome that is needed.

      • Those who didn’t benefit from the bubble have pre paid more than a decade of pain. But that’s ok or something.

    • Doomsday Prepper : Have a look at the TV show of the same name, then you might see how equally ridiculous you guys here look.

      • [email protected]

        sign on the line uptown
        double your money in 7years
        go uptown go

    • “I know alot of people on Macro Business are sitting here on the sidelines cheering and hoping that it all collapses so they can potentially buy cheaper or for whatever motive…heck if property collapses (or should I say WHEN) I stand to benefit myself….”

      I think there’s only a few that genuinely have that as their motivation.

      The rest are probably doing it ironically out of despair for the situation we’re now in. The fact that we’ve reached the point we’re at now suggests to me at least that there’s absolutely no hope of meaningful reform; the bubble will continue to be blown until such point as it bursts catastrophically.

      “But the truth is, this country is being set up for a situation that could destroy our standard of living for a generation…

      And the sad thing is, a fair bit of that pain could have been avoided…it now seems inevitable”

      It COULD have been avoided. Maybe even as late as a few years ago the powers that be COULD have engineered a slow melt. But with the capex collapse rapidly approaching, what chance have we got now? It’s too late.

      Our trajectory has been set, as far as I’m concerned it is inevitable. Hundreds of thousands of households will be financially ruined for decades.

  6. The less APRA does and the more the RBA slashes the better, it will bring an end to this circus quicker enabling Australia to re-balance and start things properly.

  7. Look at that beaut Macroprudential at work! Soon punters will be paid to take out a mortgage. Then we will all achieve Nirvana.

    HnH, Lorax et al – are you paying attention? When are you going to be convinced that there was never any real intention for introducing effective MP tools? And that we all had been taken for a ride with rate cuts?

  8. As the resources nvestment boom unwinds and the car/component industry shutters you may see unemployment rise sufficiently and quickly enough that there are forced sellers at a time when supply is increasing.

    If so that is when you are most likely to see price falls, not while unemployment and incomes are stable and interest rates falling.

    Another year or two before anything really bites, I expect.

  9. “half of all home loans on their database had a maximum LVR of 95 per cent or higher.”

    They key word here is “maximum”. How many loans are actually at the maximum?

    And if it’s a property for an investment loan, the bank will have secured it not just against that property but the borrower’s home as well.

  10. “Seriously, how much more evidence do they need that housing speculation is out of control?”

    When investor loans hit 80%?

  11. more than half of mortgages with LVR 95% or more … “huge” buffer for banks to avoid losses in case prices fall to one of the averages (-40% relative to rents or -50% relative to income)

    and if price fall overshoots (as it always does) I wonder how big losses will bank have after prices fall 60% or more

    • @DoctorX : :

      Don’t wonder too much, you might get lost. Oh, no, sorry, wonder too much so that you can get lost, please, pretty please 🙂

    • Do you really think that half of all mortgages are written at 95% LVR or more? If you do, you need to re-read the article, and brush up on your comprehension skills…..

      The article simply refers to the maximum LVR stated as being available for the various mortgage products advertised as being on “offer”. Note that often there is fine print requiring loan guarantors with extra security (ie mum and dads house) for 95% LVR. Also note my post further up about Genworth’s latest results – only 12% of loans actually written (and LMI insured) are > 90% LVR.

  12. There cant be any macropru because it will bring on the crash. The use-by date has passed. It was probably 12-18 months ago – before the last set of cuts by the RBA led to the mega-pumping.

    What’s happening now is fierce arse-covering, very very fierce arse-covering by those who’ve dropped the ball.

    And there is also no way the worlds largest pack of fools (our govt) is going to have the competence to pull off anything this essential with success. We should never forget Hockey’s and Abbott’s apologist asides in support of the speculative IP narcosis afflicting this country.

    Wether you cheer for it or not, expect a massive crash.

    We’re well past the event horizon.

    Not even light will escape this property bubble black hole.

  13. Posting this article is simply clickbait. The source should tell you enough – http://www.news.com.au. It is a fact lite, zero analysis source that is trying to generate eyeballs for their advertising, and to re-post it here is a bit of a laugh.

    There is some deeper analysis you could do that would be helpful to understand what the actual situation is, but that might unhelpfully reduce the hysteria.

    • +100 – and it looks like 40-50 people here minimum were sucked right in by the click bait! Use your brains people! Sheez.