GFC strikes off no deposit home loans

The global financial crisis has killed the no deposit home loan, as mortgage lenders continue to tighten lending restrictions under the higher cost of funds. According to a report by RateCity, Australian mortgage lenders no longer offer 100% loan-to-value ratio (LVR) home loans - compared to the mid 2008's where more than 650 100% deposit home loans were offered.

RateCity also found only 20 home loans on the mortgage market currently offer 98% LVR; while there are 89 home loans offering 97% LVR compared to 355 in 2008.

RateCity's chief executive officer Damian Smith said Australians need to prepare for even tougher lending restrictions this year.

“While the Australian economy is fairing much better than many other countries, our mortgage market is still impacted by offshore lending markets because many financial institutions borrow funds from other countries,” Mr Smith said.

Credit Union Australia’s chief executive Chris Whitehead told The Australian Financial Review that 100% LVRs were unlikely to return in the next few years as they reflected a level of confidence in housing prices that had since subsided.

“LVR tightening reflects their [the banks] cherry-picking of certain customers, which a lack of competition has made possible,” he said.