Australian Property News

Smaller deposits required for investors

Posted on Tuesday, March 08 2011 at 1:19 PM

Increased competition among mortgage lenders means better deals are being created for investors, according to mortgage broker company Australian Finance Group (AFG).

General manager of sales and operations Mark Hewitt says the bank wars are definitely helping investors with rates, upfront fees and policies.

"We're seeing lenders once again offering up to 95 per cent of property values as they try to attract consumers back into the market," he says.

Non-bank lenders are also attracting more business. AFG says they comprised around 21 per cent of all home loans processed in February.

"This continues the trend reported by the Australian Bureau of Statistics showing the market share of non-bank lenders increased to 15.4 per cent in the December quarter, double its lowest level of 7.5 per cent in the first quarter of 2009," Hewitt says.

However, refinancing during February comprised 37 per cent of all mortgages processed – less than the average 38 per cent for the past 12 months. In addition, the AFG Mortgage Index shows loan-to-value ratios (LVRs), or the value of loans expressed as a percentage of the value of properties, fell to 53.2 per cent in February.

AFG says this is the most conservative LVR figure in six years, indicating mortgage buyers borrowed only around half the value of the properties they were buying or refinancing.

The mortgage sales for February also showed that recovery from the summer of disasters has yet to occur, with processed loans down 9.7 per cent. New South Wales was the only state to show a modest increase (2.7 per cent). Mortgage volumes in other states fell by 8.1 per cent in Victoria, 8.8 per cent in Western Australia, 16.3 per cent in Queensland and 22.9 per cent in South Australia.