As from Monday 30 March 2009, the Bank is making the following additional policy changes:
- Maximum LVR of 90%, excluding LMI, regardless of the purpose, for all customers who do not have current credit facilities with Commonwealth Bank.
- Mandatory 5% genuine savings for new borrowers where the LVR is > 85%.
Maximum Lending Margins
The maximum LVR for all customers applying for a Home Loan, Investment Home Loan and/or VLOC, regardless of the purpose, will now be 90%, excluding LMI, unless they have 'current credit facilities' with Commonwealth Bank.A 'current credit facility' is defined as an existing consumer lending product (i.e. Home Loan, Investment Home Loan, Line of Credit, Personal Loan or Credit card) which has been funded for at least 6 months with no arrears or missed payments. Closed accounts are ineligible.
Customers cannot borrow above the maximum LVR of 90% if:
- They do not have a current consumer lending facility (i.e. Home Loan, Investment Home Loan, Line of Credit, Personal Loan or Credit Card) OR
- They have a current consumer lending facility that has been funded for less than 6 months OR
- They are refinancing OFI debts (refer Update 27 February 2009)
Customers that do not have "current credit facilities" should be encouraged to reduce their LVR to < 90%.
Richard Taylor | Australia's leading private lender
Combined this with not recognising the FHOG Boost as geninue savings, this will really tighten the rope around the typical FHB's neck. A requirement of 5% geninue savings takes the FHOG Boost out of the equation.
Is this the continuation of a credit tightening trend from the banks, as a defensive strategy in their forecast that property price will fall accordingly?
Would this not lead to a slow down in the number of FHBs in the market, if the rest of the Big Banks proceed down that path? In return, more FHBs being forced to save more also means more renters in the market, so good for landlords.
Interesting to hear other comments.
Regards
Daniel LeeI think it is what most investors and ordinary home buyers have been waiting to hear some normality returning to the market.
Definately a shot down for FHB although as i mentioned there are still lenders who dont require genuine savings statements and will go to 95% but they are disappearing.
Think most investors are waiting on the sidelines just to hear such news.
Richard Taylor | Australia's leading private lender
Hi, Richard
This issue got me interested enough to show some simple figures to show CBA's credit tighening will affect property prices.
Established Property value: $140K
95% LVR: $140K * 0.95 = $133K
90% LVR: $140K * 0.9 = $126K
Difference in credit available = $7K. FHOG Boost of $7K will cover the difference.Once property value goes above $140K…
Established Property Value: $200K
95% LVR: $200K * 0.95 = $190K
90% LVR: $200K * 0.9 = $180K
Difference in credit available = $10K. FHOG Boost of $7K. Deficit of -$3K.So, as more lenders tighten their credit criteria in the near future, episodes of these credit shortfall will increasingly occur for FHBs in the lower end of the market. When enough of these shortfall occur and more FHBs are unable to put in emotionally high offers anymore, even that end of the market will start to cool down and vendors' expectations along with it.
This could get interesting when other lenders follow suit.
Regards
DanielDaniel
Not of matter of when they change they already have.
3 lenders dropped back to 90% lvr in the last 10 days and they added to Anz etc who changed some 3 months + ago.
Richard Taylor | Australia's leading private lender
Bum – a suppose a debit card with CBA isn't going to cut the mustard?
Nah hate to say NO maree.
Richard Taylor | Australia's leading private lender
drat – oh well as long as all other factors stay aligned should be ok by mid july to be in a position to purchase a property.Do you think it will lower the LVR to =< 80% ???
It will be interesting to the property priceAll we need is for the Fed Govt to decide not to extend the FHOG Boost; then the party will be on for Property Investors.
I read on The Age today that the FHOG Boost cost the Feds $1B so far, money which can be used more effectively in other areas than propping up the weak housing market, which has already been helped by the interest rate cuts anyhow.
I really that the FHOG Boost is creating a bubble on the lower-end of the market.
Regards
DanielJust out of interest, for a customer that does have 'current credit facilities' with the CBA how much above the maximum of 90% LVR that can be borrowed? Is it up to 95% or is there potential for up to 100%?
Craig
Hate to say no the days of 100% have been and gone.
CBA policy is that if the client has a good asset base and excellent repayment history they will look at a 95% LVR however in talking to them this is likely to be more by exception than the rule as it requires approval from higher powers.
Richard Taylor | Australia's leading private lender
drat – oh well as long as all other factors stay aligned should be ok by mid july to be in a position to purchase a property.
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