90% LVR Mainstream Lending Back

90% LVR investment IO lending is now back - one of the major lenders has opened up on this again.

Still 90% LVR inclusive of LMI maximum, however there are second tier/non-bank options which will still take you to 95%.

We're seeing a slow roll back of product based restrictions for investors - however the borrowing capacity/servicing restrictions remain in place which is to be expected.

 

CBA are the lender (for those who like the nitty gritty).

Agree that others are likely to follow over time.

IO restrictions and difficulties are becoming tougher on OO lending though, CBA are including it in a quasi performance scorecard for broker segmentation.

 

Hi, is this an information that is available for general public or has it been disclosed only to mortgage brokers?

Could you guys provide details? interest rates? conditions? etc.

 

A lot of releases now are smoke and mirrors - a lot of banks don't want to put their policy changes in writing as they don't want market changing policies to be leaked to the media within 2 minutes of their change. They don't particularly like it when you openly note it in writing/in a public space either. (hence why I don't particularly like to name the specific lenders unless they've openly released the info too )

Interest rate is dependent on total borrowings - but they're being fairly aggressive in their discounting again for IO even up to 90% LVR. These won't compete against 2nd tier discounting, but a good overall option for those wanting to mitigate cash flow requirements on a low deposit investment purchase whilst focusing on paying down non tax effective debt.

 

Banks make money by lending money..They had to come back eventually. I hope competition heats up even further when my P&I fixed investment loan comes for renewal next June...

the biggest risk to above loosening is Royal commission....

 

It would be available across all their existing products for regular residential lending. Interest rates would be what are published and in the case of their MAV/Wealth package what can be negotiated. I suspect they won't be quite so generous in their negotiations for a 90% loan as compared to an 80% I/O loan.

There is an X factor which you're not going to find anywhere and they're not going to disclose to anyone. They would apply fairly harsh credit scoring to a 90% I/O loan. Even if your application ticked all the boxes, they might not approve the loan with very little explanation.

Also the way the CBA assesses serviceability means they'll lend more money on a P&I application than an I/O application.

 

Corey, do you think we will see the return of interest rates on IP loans to the same level as OO loans?

 

The only reason the banks would do that is to be competitive with each other. The gap has certainly closed recently but I doubt we'll see the same rates any time soon. It's simply too profitable for lenders.

 

Yeah. Haven't bothered with a NAB > 90% lend in years. They'll look for any excuse not to do it.

Actually some days I think that's kind of the case for almost any lender with almost any loan right now...

 

Any excuse to not aprrove a loan! Ah, so it is not just me that gets that feeling.

 

Any idea what sort of interest rate would be expected on a $500k loan with this product?

 

4.69%. At this point discounting is same/similar at 80 and 90% LVRs.

 

Doubtful - we will likely see competitive spikes with some lenders providing strong discounts to IO/investors - but parity for any considerable time isn't going to happen anytime soon.

There is a huge variance in pricing however - ie CBA is providing historically some of their highest discounts for new investment IO lending - but it's still 0.4%+ more expensive than other alternatives we can provide.

It all comes down to what your intended goals are and scenario parameters - there's many cases where using CBA will be necessary due to their specific policies, but they're not the catch all solution for all scenarios - especially on a pricing front.

 

Anz if they have an existing facility and gen savings. wesuck and Cba do 95 regularly for fhbs and use rent as gen savings, though I avoid wpc as their service, policy’s and procedure are pretty hopeless.

 

Or just service, generally...

 

The other thing that strikes me about so much of the bank FOH is that they don’t appear to be on any sort of hard sales commissions (as far as I can tell, perhaps there are some loose incentives), and it shows in their approach. Was managed by big 4 Bank with ‘Private Banking’ for a time and my banker was at pains to point out that they were not remunerated on commissions. I personally saw that as a negative. Staff without direct incentives seem to go out of their way to find ways to decline an application, or at least are not prepared to put in the hard yards to push through the various hoops you need to go through to get approval. I had bonus income that was removed from a servicability check recently because the processor was not prepared to add 2 numbers together. This problem is particularly accrute if you have complicated arrangements. FOH bank processes appear set up to deal with the first home buyer, with a single bank account and 1 credit card. Anything more complicated, be prepared for a rough ride. I have a Directorship in a company, and this causes no end of grief. Needed an accountants letter last time verifying as to the solvency of the company. In the end, I wound up the company simply because it I got sick of answering the questions. Part of the reason why the broker model has flourished is because a good broker will be unrelenting and persistent with the application, can think a little ‘outside the box’, can problem solve, etc, etc. Only today I finally converted a variable loan to fixed. 5 forms, 6 phone calls, unending screwups, inconsistent advice, inability to speak to a single contact point (every time you ring, you start the story all over again, etc). Sorry for the rant, needed to get that off the chest.