LVR announcement – speed bump but not all bad

MEDIA RELEASE

21 August 2013

Issued by Momentus Public Relations Ltd

Mike Pero Real Estate - LVR announcement – speed bump but not all bad

I offer the following initial observations in response to yesterday’s Reserve Bank’s announcement that from 1 October banks will be subject to restrictions on high loan-to-value ratio (LVR) housing mortgage loans.

Firstly, the announcement highlights the important role of a close mortgage broker and a real estate agent relationship that can source alternative options beyond the registered banks. I can see banks will apply their own internal policies to apply the brakes.

I believe the changes are an innovative way of slowing the low equity market down with the emphasis on the banks to choose the most deserving customers, if they are limited to the number of loans they can offer above 80%.

While it is up to individual banks how and to whom they allocate the available credit within the LVR limit, I would anticipate that priority will be given to those first-home buyers who are best dressed – ie. good track record and good incomes. Beyond that where the banks have available funds they'll pick the eyes out of the over 80% market. If there are special circumstances for loans at 90% or even 95% the banks can do them. However lenders will obviously take a cautious view of those restrictions to ensure they stay within the RB's policy.

In my opinion, there will be a slight reduction in market pace but maybe not as severe as we thought in the worst case scenario of a blanket restriction against over 80% lending.

Obviously the flow on effect will slow real estate sales across all sectors because of the flow on effect - its a bit like killing one cylinder on a V8 car – it will still have some pace but won't be as fast or as aggressive as all eight cylinders.

Finance options on homes for sale will have an effect on the saleability of some homes and where options are available, at time of sale, beyond 80% it could be considered added value to first home buyers.

All in all the news is not devastating – just a small obstacle." Pero said.

ENDS

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