Resimac waives LMI to counter housing demand slide
Lenders are ramping up discounts and freebies in the face of new evidence that prospective home borrowers are delaying purchases as the property market correction accelerates.
While banks such as Westpac and NAB are fattening cash-back offers to new home borrowers, non-bank lenders are widening incentives to keep their mortgage books ticking ahead of system growth.
Homeloans Ltd, which is soon to be rebranded as Resimac, is the latest lender to tinker with its loan offers after announcing that it will waive lender's mortgage insurance for highly geared borrowers.
The company has launched a new product that excludes LMI fees for borrowers planning to buy a property on a loan to value ratio of 85 per cent.
"A key feature of the loan is that there is no risk fee or LMI payable, which we expect will be attractive to a range of segments including first-home buyers trying to get into the market as it becomes more affordable," said Resimac's head of third party distribution, Daniel Carde.
The re-emergence of LMI-free lending comes as Roy Morgan Research's latest quarterly survey of home loan intentions found that borrower demand is set to slide sharply over the next 12 months.
Over the three months to the end of October around 1.21 million Australians said they planned to take out a home loan in the next year. This is 260,000 or 17.7 per cent less than the 1.47 million people who said they were poised to enter the home loan market in the October quarter last year.
The big takeaway from the Roy Morgan survey is that the slide in lending activity is primarily being driven by demand-side forces, rather than funding supply issues.
Roy Morgan research director Norman Morris attributes most of the demand run-off to a collapse in the number of first-home buyers seeking to enter the market.
"The decline in home loan intenders over the last year is likely to have a major impact on banks in the coming year, particularly as the drop has come from first-home buyers who are major generators of increasing volumes," he said.
"The reduction in first-home buyers is likely to come from a number of potential reasons, including uncertainty as a result of declining housing values, likely interest rate movements, mortgage stress and job risks."
Only 411,000 first-home buyers said they intended to take out a loan in the October quarter compared to 740,000 in the corresponding period last year.
Most lending activity over the next 12 months is likely to be generated by homeowners looking to refinance their debt, the survey found.
Canstar's Steve Mickenbecker expects first-home buyers to continue delaying purchases until property prices settle.
"The last thing they want to do is jump in to the market now and be stretched with new debt and watch the value of their property fall," he said.