Low-deposit loans hit record low

Data released by APRA today has confirmed banks are demanding bigger deposits from new buyers as part of their serviceability crack-down.

APRA’s Quarterly Authorised Deposit-taking Institution Property Exposures released today shows the number of new loans with a 10 per cent deposit fell to the lowest level on record.

New home lending, September quarter 2018:

• 90% LVR loans fell 13.4% year-on-year, and down 42% in 10 years;
• Low-documentation loans fell 43% year-on-year, and fell 97% in 10 years;
• Interest-only loans fell 13.2% year-on-year, and fell 26% in 10 years.

Sally Tindall, research director at RateCity.com.au, said the banks’ serviceability changes were stumping some first home buyers.

“Banks are increasingly demanding a 20 per cent deposit from people applying for new loans,” she said.

“While house prices are dropping nationally, this is a big stumbling block for anyone who miscalculated how much they need for a deposit.

“Just 6 per cent of new loans written this quarter had a deposit of 10 per cent or less.”

In Sydney, a person needs $187,143 for a 20 per cent deposit on the average house, in addition to stamp duty.

In Melbourne, a person needs $153,786 for a 20 per cent deposit on the average house, in addition to stamp duty.

Tips to get in the property market:

1. Save up for a 20 per cent deposit. While it will take longer, it will put you in good stead over the long term. Plus it means you won’t have to fork out for costly lenders’ mortgage insurance;
2. Cut down on discretionary spending. Banks are looking more closely at spending habits;
3. Start small. Don’t set out to buy your dream home;
4. Factor in a decent buffer of 2 per cent. While rates are low, they will eventually rise. 

Notes: Statistics were taken from the new APRA quarterly authorised deposit taking institution property exposures report on new housing loans released 12 December 2018.

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