Lenders have continued to tighten their residential lending policies since Easter. Reduced loan to valuation ratios (LVRs), proof of 5% genuine savings, lengthy approval times and sudden increases in fixed rates are key issues at present.

LENDER COMPARISON

This table shows current lender variable interest rates and maximum LVRs for popular loans. Some lenders will still add Lenders Mortgage Insurance (LMI) to the base loan amount:

		%Rate p.a.	LVR max %
Heritage	Basic Variable	4.82	90
BankWest	Rate Tracker	4.85	90 + LMI
CBA	3 yr Special Variable	4.96	90 + LMI *
RAMS	Basic Variable	4.99	90 + LMI
PLAN Lending	Performance Plus	5.05	90
HomeSide	HomePlus	5.07	95
St George	Basic	5.07	95 + LMI
ING	Mortgage Simplifier	5.09	90 + LMI
Homeloans Ltd	Premium Saver	5.09	90 + LMI
Suncorp Metway	Standard Variable	5.10	95 + LMI
ANZ	Simplicity Plus	5.11	90
Westpac	Flexi First Option	5.11	92 **

* CBA will lend to 95%+LMI for existing customers who have held a well-conducted
credit facility such as a credit card or personal loan for at least 6 months.
** Westpac will lend to 97% for existing customers who have held a Westpac account
for at least 6 months.
Only a few lenders will now approve 95%+LMI. Employment stability, 5% genuine savings and clean credit history are essential.

FAMILY GUARANTEE LOANS

As most lenders are now pulling back to 90%LVRs, many borrowers are unable to show evidence of 10% deposit, plus additional funds to cover stamp duty and mortgage insurance. Most lenders will offer Family Guarantee loans as a way of resolving this deposit problem. These loans involve family members (usually parents) offering their own property title as secondary security for the loan. A parental guarantee is signed for an agreed amount so that the new loan is reduced to no more than 80% of total security value. As a result, NO MORTGAGE INSURANCE IS PAYABLE….this can result in a saving of about $10,000 on a typical $380,000 first home buyer loan. Parental Guarantee loans will become more popular in the future as a response to tightening lender credit policies. If parents still have an existing mortgage on their property, the borrowers will generally have to use the same lender.

INCREASES IN FIXED RATES

In the last two weeks, numerous lenders have increased some of their fixed rates by between 0.2% and 0.45%. Fixed rates are not linked to Reserve Bank interest rate announcements and can be changed at any time. Fixed rates have already bottomed out.

Current advertised 3 year fixed rates are shown below for loans over $300,000 :

		% Rate p.a.
HomeSide	Homeplus	5.44
Westpac	Premier Advantage	5.59
Adelaide	Smartfix	5.69
St George	Standard	5.69
RAMS	Pro Pack	5.79
Westpac	Standard	5.79
ING	Smart Pack	5.89
Heritage	Standard	5.99
CBA	Pro Pack	6.04
BankWest	Standard	6.19
ANZ	Standard	6.19
CBA	Standard	6.19
Citibank	Standard	6.39
Suncorp	Standard	6.39
AMP	Pro Pack	6.59

There is a very wide spread in lender fixed rates which is not the case with variable rates. Fixed rates are also substantially higher than variable rates currently available. The anticipated consumer swing to fixed rates may not occur if this gap continues to widen with increases in lender fixed rates already happening.

Melbourne Mortgage Finance is always available to assist you with loan applications for owner-occupied homes, investment properties, construction, refinance, debt consolidation, line of credit or reverse mortgages. Please call or email at any time. Same-day service is generally available.

Barry LeBrocq

Melbourne Mortgage Finance
Mob 0437417042
Web www.mmfinance.com.au

Disclaimer: the above information is intended as general information only and is not intended to cover specific personal situations. Every effort has been made to ensure that content is accurate, however it should be understood that lenders are constantly changing their products, interest rates and lending policies. Potential borrowers should contact Melbourne Mortgage Finance to discuss their specific personal financial needs and loan eligibility prior to making a borrowing decision.