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Australian Prudential Regulation Authority (APRA) data shows the number of residential mortgages with debt to income ratios above six has increased by a whopping 42% to $17.5 billion in the June 2020 quarter.
A debt to income ratio (DTI) is one way the banks measure the ability of a borrower to comfortably repay their mortgage.
While there's no cap on DTI ratios, a DTI six times higher than a borrower's income is considered 'high risk' by many lenders.
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 | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
Additionally, the data revealed that the value of 95% loan-to-value-ratio (LVR) loans has soared by 60% from June 2019 to June 2020 to the value of $1.8 billion.
The higher LVR lending could be buoyed by the Federal Government's First Home Loan Deposit Scheme, which allows first home buyers to enter the property market with a deposit as low as 5%.
According to the scheme's administrator the National Housing Finance and Investment Corporation (NHFIC), roughly 12.5% of all homes purchased by first home buyers during the peak of the COVID-19 crisis were done so using the scheme.
The report by the NHFIC found that the scheme has allowed first home buyers to shave an average of four years off the time it normally takes to save for a house deposit.
Meanwhile, interest-only home loans jumped 13.1% in the June 2020 quarter to the value of $20.0 billion, while the number of owner-occupied loans increased by 31.1% and investor loans were up by 24.1%.
"Despite ongoing challenges to profitability, bank financial positions remain sound due to strong capital and liquidity levels, support through various policy measures and signs of reduced risk appetite in residential mortgage lending," the APRA report said.
"There is some degradation of asset quality as a result of COVID-19, although the full scale of this impact will only be seen in the coming quarters."