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Loan Market News

Keith’s Korner – LVR Rule Change

As of 1 May 2020, for a minimum 12-month period all LVR restrictions have been lifted by the Reserve Bank. How has this been interpreted….

Owner Occupiers:
• Banks are no longer restricted to a 20% limit of their total lending to borrowers who are borrowing over 80% LVR. Therefore, more next home borrowers and 1st home buyers could apply for loans.
Investors:

Banks are also no longer restricted to
• (A) the amount of lending they can provide to property investors and
• (B) the banks are no longer limited to a maximum 70% against a rental property
in other words they could allow 80% LVR across the owner occupied and rental property.

Where are the Banks currently at?

We are still to see how these Reserve Bank changes will affect the Banks internal lending policies in the short term.

As it stands today (and that may change next week) it appears the Banks are requiring a minimum 20% deposit for owner occupied properties and in general this is for live deals only (not pre-approvals) and own Bank clients.

The Banks have a concern that, if they lend at 90% and house prices devalue this year by 10%, then the client’s equity will be evaporated which may then leave a client vulnerable should they have to sell.

The number of days for processing a loan application varies from Bank to Bank, however, in general allow 7 working days the Banks to assess the application. If the Bank also requires a registered valuation, then allow 4 days on top, so ideally allowing up to 15 working days to be safe.
Existing Bank Pre-approvals

All existing Bank pre-approvals will need to be updated and verified with the Banks.

In many situations they may no longer be valid, especially if the approval is based on a deposit under 20% of purchase price and may also be subject to job security.

In addition, the banks may be requesting confirmation from an employer or self employed applicants that their job or business is secure and that their finances have not been seriously effected by Covid-19.

If you are thinking of viewing a property, you would want to be confident that as the purchaser you have a “Current Bank Pre-approval” to buy the property, both from your ability from a lending perspective and confirmation the Bank wishes to lend on the property you are interested in.

This is where I can assist to qualify you as a pre-approved buyer.