The changing face of loans:

From the desk of Nick Lockhart MRD

Monday 18th January 2008

Because so many US homeowners are failing to repay their mortgages, for some Australians their home loan is becoming more expensive or harder to get. It costs our banks more to borrow money so they are passing the cost to you, the customer.

The effects of this credit squeeze is not just seen in interest rate rises but in the way lenders qualify you for loans. Many brokers have commented to us that lenders are becoming tougher on the "low doc" and "no doc" loans. The loans at higher LVR's (loan to value ratio) are becoming harder to get and we are seeing tougher valuations. It is hardly surprising as lower valuations and loan to value ratios limit the lenders risk factor - something they are becoming acutely aware of. Much of this appears to be driven by the mortgage insurers as well as the banks.

We have recently had some valuations on townhouses in Brisbane $40k low on a $345k price. How you could build properties like these so close to Brisbane for $300k escapes us. Yet we have recently see valuations of townhouses in the Robina area (Gemvale Glades) come in at full contract price of $455k with one of the "Big 3" banks. There seems no rhyme nor reason at times.

Not that there is any reason to be alarmed, just be informed and prepared to expect a few issues. We have often said it seems at times that it is not just a case of finding a property you like but one that your bank ”likes” as well

The changing face of loans:

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