Australian homeowners are being offered large discounts on increasingly high mortgages, as banks attempt to revive the lending market.
Customers who borrow over A$250,000 can have at least 0.7 percent off the interest rate on a standard variable mortgage and 0.8 percent off a A$500,000 loan.
This means reducing the current headline rate on a mortgage to seven percent from 7.8 percent, as banks engage in a battle to boost their home loan books at a time of passive credit growth.
Last week, Goldman Sachs reduced its forecasts for mortgage growth to 2.9 percent for 2H 2011, which will result in an increase of only six percent this year.
Aside from increased discounts, major lenders have also loosened the limits on the percentages of total amounts they will advance with a deposit. Following the global financial crisis, the limits were reduced to as low as 80 to 85 percent.
But in the quarter starting February, Australia’s largest lender, the Commonwealth Bank (CommBank), augmented its loan-to-valuation (LTV) ratio to 95 percent from 90 percent, according to recent research conducted by Deutsche Bank.
CommBank is also providing a 0.75 percent discount on its standard interest rate of 7.81 percent for those who borrow between A$250,000 and A$500,000, a 0.85 percent discount on loans worth A$750,000 and 0.9 percent off higher mortgages.
Westpac is now allowing Australian homeowners to borrow 85 percent of their loan without requiring mortgage lenders’ insurance — a move which protects the bank if people default on their loans.
It has also lowered the amount required for a deposit from 10 percent to five percent of the total amount. Moreover, it is also offering similar interest rate discounts to CommBank.
Meanwhile, National Australia Bank, which has reduced the basic price of loans to attract more business and recently launched an online-only home loan offer of 6.59 percent, is providing slightly lower discounts than its competitors.
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