High-LVR home loan values soar 50% in a year

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on June 09, 2020
High-LVR home loan values soar 50% in a year

Photo by Priscilla Du Preez on Unsplash

Data released today revealed 95% loan-to-value ratio home loan values held by the banks increased 52.6% from March 2019 to March 2020.

In total banks held $95 billion in mortgage lending in the March 2020 quarter - up 20.1% on the same quarter in 2019, but down 10.9% on the December quarter, according to the Australian Prudential Regulation Authority's (APRA) quarterly statistics released on Authorised Deposit-taking Institutions (ADIs).

APRA's report said, "This likely reflects the seasonality of the housing market and potential early changes in borrower sentiment with the onset of COVID-19".

High loan-to-value ratio (LVR) loans of 95% also saw the highest growth in percentage terms out of any ratios, up from 1.5% of total loan books to 1.9% in a year.

In March 2019 total 95% LVR ratio values amounted to $1.174 billion of the total loan book of just over $78 billion, while in March 2020 that value was $1.791 billion in a total loan book worth about $94.5 billion.

However, high-LVR loans make up a small segment of the market and could decrease as banks look for 'safer' borrowers.

"Given the current heightened risk environment, a shift in new lending away from higher LVRs is possible," the APRA report said.

This is evident anecdotally as many lenders are cutting rates for borrowers with 70% LVRs or less, however the higher LVR lending could be buoyed by the Government's First Home Loan Deposit Scheme, which was launched in January.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.

Lender
Advertised rate Comparison rate* Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
FixedMore details
NO UPFRONT OR ONGOING FEES

Basic Home Loan Fixed (Principal and Interest) (LVR < 70%) 3 Years

NO UPFRONT OR ONGOING FEES
FixedMore details
  • Easy, digital application process
  • Market leading app to help you pay off your loan sooner
  • No on-going fees
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of January 24, 2022. View disclaimer.

Meanwhile, the interest-only portion of the loan book slid to 17.4% in March 2020, but newly-funded interest-only loans increased for the first time since June 2019, comprising 18% of the newly-funded loan book.

"Further shifts to interest-only lending are likely, with borrowers seeking flexibility in their loan conditions to meet repayments during COVID-19," APRA's report said.

Australians are also taking on more debt in proportion to their income compared to a year ago.

Just over $15 billion worth of loans were held by the banks for both owner-occupiers and investors with a debt-to-income ratio of 6x or more in the March 2020 quarter - 17.6% of the loan residential loan book.

In March 2019, that figure was just over $11 billion, or 16.5% of the residential loan book.

It should be noted that this generally coincides with property prices rebounding markedly after finding a floor in May 2019.

For reference, Australia has the second highest personal debt-to-GDP ratio in the world at 120.14%, behind Switzerland at 128.7%, according to the International Monetary Fund.

The Australian Bureau of Statistics also estimates more than half of our debt is tied up in owner-occupier mortgage lending.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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author-avatar
Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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