Going against the trend set by the major banks over the past few months financial services group Future Financial has lifted the Loan to Value ratio on its full doc mortgages to 95 percent.
Westpac recently cut its LVRs from 97 percent to 87 percent citing increased risk factors as the main driver of the unfavourable decision to Australian home owners and first time buyers. Analysts predicted other lenders to follow suit but the opposing move by Future Financial has signaled that the residential lending market may be in full recovery mode.
At the height of the Global Financial Crisis lenders were forced to reassess their lending criteria as it emerged that thousands of mortgages issued during boom times were at higher risk of default than first thought.
Low doc and no doc home loans all but disappeared and lenders were forced to drop their LVRs. This pushed potential home buyers out of the market if they did not have enough savings to fund the larger deposit requirements.
By lifting the LVR on their full doc mortgage products Future Financial has signaled that the worst of the recession may be over. Recent figures released from the Reserve Bank also indicate that the residential housing market grew at a healthy rate in 2009.
The move by Future Financial will be welcome news for many first time buyers who have struggled to put together the funds required for deposits of more than five percent. If similar moves are made by other lenders in early 2010 it could mean the residential property market has fully recovered.
Lifting of LVRs is good for mortgage brokers as they will be able to offer more choice to their clients.
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