Lenders enticing borrowers with low deposit requirements

More than two-thirds (70%) of lenders are now requiring a deposit of as little as 5% in an effort to encourage more borrowing and to “kick-start” a sluggish mortgage market, according to comparison website RateCity.com.au. 

“Almost 70% of home loans in our database now offer up to 95% of a home's purchase price, which is the highest loan-to-value ratio levels we've see in more than two years, up from 49% 12 months ago," says RateCity CEO Damian Smith. 

“All major four banks now offer home loans with up to 90% LVR while Commonwealth, NAB and Westpac also offer up to 95% LVR on some of their home loans.” 

Lenders are relaxing borrowing criteria, having already used the other levers – negotiating on rates and fees and cutting fixed rates – available to them in the absence of an official interest rate cut. 

It comes as expectations of rate cut on Melbourne Cup Day subside on the back of a drop in unemployment. 

"There’re three things lenders can do in the absence of a rate change from the Reserve Bank. First, they negotiate on rates and fees – we’ve seen ads from the big four showing their willingness to negotiate variable rates, and we think many borrowers should be able to get variable rate loans well below 7%,” Smith says. 

“Second, they’re continuing to cut fixed rates. The average three-year fixed rate is now 6.62%, versus 7.38% in July this year, with the lowest at 6.25%. 

“But finally, they’re also proving willing to lend to people with less deposit or equity, by increasing the loan to value ratio. This means many more potential borrowers are 'eligible' for loans than might have been the case just 12 months ago.” 

Home loans with up to 95% LVR over the past 12 months

Number of loans with up to 95% LVR

% of RateCity database *










Please note: total home loans monitored by RateCity, the total number of home loans available varies month to month. Source: RateCity. 

According to RateCity, there were more than 40,000 fewer first-home buyers in the last 12 months compared with the average of the last four years.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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