Adelaide Bank describes itself as a mortgage bank operating in a commodity market, but even so the bank is showing finesse in making the most of the mortgage boom to drive volumes and market share. The bank is also striving to operate as a price leader rather than a price taker in some segments of the market, with Adelaide chasing the low documentation segment of the home loan market very hard.Managing director Barry Fitzpatrick said yesterday that low doc lending now accounted for 37 per cent of the bank's new home loan volumes, up from 20 per cent at times during the second half of 2003.The attraction of low doc loans apart from simple demand among a workforce that increasingly is made up of contractors and self employed people is that banks, such as Adelaide, are charging a premium for low doc home loans. Adelaide usually charges an interest rate premium on low doc loans of 0.75 percentage points, which is a little hefty by the standards of some other providers in the low doc home loan segment. A premium around 0.6 per cent is more commonAsked about the rationale for the premium, Fitzpatrick said simply that the bank charges this premium, "because we can."However, he doesn't expect the low doc loan premium to endure all long in the market, with competitive forces to erode the premium.Asked about the extent to which there is any additional risk in low doc home lending (the view held by the Australian Prudential Regulation Authority), Fitzpatrick said "I don't think so. We mortgage insure all loans greater than 80 per cent [loan to valuation ratio], or for inner city apartments where its 70 per cent. We don't see any credit quality issues at all. Low doc loans behave exactly the same as the rest of the portfolio.The bank said there would be a small impact from APRA's proposed tinkering with the concession on risk weightings on low doc home loans, with an increased risk weighting on around $110 million of loans, or fewer than 600 loans.