Low Document Loans Dead?

Low Document Loans are Dead, says John Symond – was a recent heading in The Australian, but is this really where we sit today?

Westpac, St George and RAMS are the latest lenders to follow in the footsteps of CBA, ANZ and NAB who tightened up on their policy for self employed borrowers six months ago. The change will greatly impact the low document loan segment of the market where borrowers are now required to provide the past 12 months Business Activity Statements and in many instances business transaction account statements. This dramatic policy change does not leave a great differentiation between full doc and low doc loans.

When low doc loans first became available they were not brought to the market by these major lenders but by the non major lenders, so it is no real surprise that our major banks have never been fully comfortable with this style of lending, particularly in a market where they are more than ever picking and choosing their new customers.

Good news for those customers still dealing through these major lenders and battling with their less than satisfactory servicing issues, this will reduce the volume of applications to the lender and therefore hopefully bring us back to a time where purchase settlements are once again taking place on time.

But where do you now sit if you are a self employed applicant who does not fit within the lenders strict new guidelines? It’s back to the non major lenders for you, and when we say non major this thankfully does not always suggest non competitive. There are many lenders in our market today that have chosen the low document segment of the market to specialise in and therefore offer great competitively priced products. And the add bonus, you too will no longer have to deal with less than satisfactory servicing issues.

However, like many thing in our current economy this is subject to change without prior warning. Unfortunately no one has a crystal ball to see when things will return to the ‘good old days’. As much as Australia is in a very positive position compared to the rest of the world, with the impact on our economy being so much less than anticipated we still are not able to anticipate what changes will still need to be made before we once again return to full strength.

So the biggest piece of advice we can give you in the lending industry is – do all you can today, because tomorrow is another day. If you’re considering investing further in property, buying your first home or renovating the family home, even if you’re not ready to spend the money now, put those things in place that will ensure you’re not limited when you are. Unlock your equity, get a preapproval, whatever it is to increase your chances now of not being affected by any further changes.

Remember tomorrow will see the end of the Governments increased FHOG offering, this will inevitably bring about more changes within the property market. Are you ready to seize the opportunities?!