100pc home loans a thing of the past

By By Karina Barrymore, From: News Limited newspapers, 22 March 2010

BANKS and other lenders have ditched their boom-time no-deposit home loans, despite a huge surge in new demand from would-be borrowers.

The days of 100 per cent even 110 per cent home loans are over, the mortgage industry says, as lenders crank up the amount of deposit required for new loans.

The main push comes from mortgage insurers, who decided to stop covering lenders for defaults on these loans.

Mortgage insurer Genworth Financial says it now requires a minimum loan-to-value ratio of 95 per cent.

As a result, lenders have increased their deposit amounts, including Australia's biggest home lender, Commonwealth Bank, which doubled its minimum deposit to 20 per cent on some investment loans.

Westpac also increased its minimum deposit from 10 per cent to 13 per cent for some new customers, says research company Infochoice.

"We have seen a significant increase in minimum deposit requirements by lenders. Gone are the days of no deposits being required by the banks," Infochoice chief executive Shaun Cornelius says.

While this supports more responsible lending, it doesn't help borrowers who have the ability to repay a mortgage but don't have access to a 20 per cent lump sum, Cornelius says.

"This may mean some Australians will have to wait longer before they can afford to buy their first home."