{"id":7538,"date":"2016-03-31T01:00:11","date_gmt":"2016-03-30T14:00:11","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=7538"},"modified":"2016-03-31T01:00:11","modified_gmt":"2016-03-30T14:00:11","slug":"bigger-loans-smaller-deposits","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/bigger-loans-smaller-deposits\/","title":{"rendered":"Bigger loans, smaller deposits – Sally Tindall"},"content":{"rendered":"

 
\nA study of more than 3,000 potential mortgage customers has found an alarming number of people are opting\u00a0for bigger loans with smaller deposits. The study was taken by comparison website RateCity and\u00a0Sally Tindall<\/strong>, Money Editor for Rate City joins me to discuss the findings.
\n <\/p>\n

Transcript:<\/strong><\/h4>\n

Kevin:\u00a0 <\/b>A study of more than <\/b>3000 potential mortgage customers has found an alarming number of people are opting for bigger loans with smaller deposits. The study was taken by comparison website RateCity, and Sally Tindall, who is the Money Editor for RateCity joins me.
\nSally, this is somewhat of a disturbing report.
\nSally:<\/b>\u00a0 It is disturbing. We\u2019ve found that our customers using our site are really looking for the smallest deposit possible and they\u2019re looking to take out really large loans. We\u2019ve actually seen an increase over the last five years of 23% in loan size, but they\u2019re increasingly asking for smaller and smaller deposits, and that could be a reflection of the fact that interest rates are so low, so people feel that they\u2019re able to stretch themselves a little bit more and buy a bigger house, basically.
\nKevin:<\/b>\u00a0 Yes, somewhat scary. What do you think of the long-term impacts of this situation?
\nSally:<\/b>\u00a0 It\u2019s an incredibly risky strategy, and it\u2019s also a much more expensive way to borrow, because small deposits actually attract higher interest rates from the banks because it\u2019s risky for the banks to be lending to people with a small amount of equity in their loan, so the customers are really at loggerheads with the banks and they are going to be paying for it in terms of higher rates.
\nKevin:<\/b>\u00a0 Are the banks \u2013 do you think \u2013 getting a little bit too soft? Are they offering too many sweeteners?
\nSally:<\/b>\u00a0 Well, look, some banks are actually really cracking down on loan-to-value ratios and they\u2019re offering the rock bottom prices of under 4% to borrowers who have hefty deposits of anywhere up to 60%, if you can believe that. But there are some lenders out there that are happy to take on new borrowing at 5% deposit, and that\u2019s where the risks really occur.
\nWe don\u2019t want to see another iteration of the US subprime mortgage market collapsing, so the government regulator is really looking at these people who have got small deposits and so are the banks.
\nKevin:<\/b>\u00a0 This might be a hard one for you to answer, Sally, but I\u2019d really like your opinion on this. We are hearing reports that as a nation, we\u2019re becoming better savers. Do you think it\u2019s just that people have the savings but they\u2019re not prepared to put it into a deposit that they\u2019re opting, as you say, to head toward the lower-interest type loans?
\nSally:<\/b>\u00a0 Look, I think every person has a different reason for wanting a small deposit. It might be that they\u2019re trying to rush into the market before it escapes. It could be that they have some sort of family circumstances where they can only get a small deposit. So everyone is different.
\nWe are actually a nation that\u2019s very good at putting money into things like offset accounts, so we\u2019re quite savvy when it comes to that, but I do think it\u2019s a matter of people wanting to buy larger properties with bigger price tags attached, particularly in markets that are increasing in growth.
\nKevin:<\/b>\u00a0 Do the banks penalize borrowers with little or no deposit \u2013 in other words, with higher interest rates?
\nSally:<\/b>\u00a0 Absolutely, and they penalize them quite significantly. Look, we\u2019ve done a bit of research into this, as well, and we\u2019ve found that some of the lowest rates on our books \u2013 at 3.89% \u2013 are only available to people with a deposit of at least 20% but in some cases, up to 60%. What these banks are telling us is that they\u2019ll give you a good rate but only if you\u2019re a refinancer who\u2019s an owner-occupier and has really stable source of income.
\nKevin:<\/b>\u00a0 Well obviously, it\u2019s good business for the bank to get people on higher interest rates, but do you think at some point they\u2019re going to cut off their book for the low-deposit type borrowers?
\nSally:<\/b>\u00a0 They certainly might. If the global market continues to be in turmoil and the government regulator here in Australia continues to crack down on risky lending \u2013 which is ultimately what we\u2019re talking about \u2013 then absolutely; we could see the banks starting to say, \u201cNo, sorry. You\u2019re going to have to stump up with more than that.\u201d
\nKevin:<\/b>\u00a0 Is the banks\u2019 tightening of lending criteria for investors, is that showing any signs of having some impact?
\nSally:<\/b>\u00a0 It really is. We\u2019re seeing the biggest impact happen in the investor lending market. Back in July of last year, most of the banks introduced differential pricing for investors and owner-occupiers, and immediately we saw that investor lending has dropped dramatically. I think between June of 2015 and December of 2015, there was a massive $2.4 billion drop in investor lending, and so that market signal is working.
\nKevin:<\/b>\u00a0 Sally Tindall, Money Editor for RateCity. Thank you for your time, Sally.
\nSally:<\/b>\u00a0 Pleasure.<\/p>\n","protected":false},"excerpt":{"rendered":"

  A study of more than 3,000 potential mortgage customers has found an alarming number of people are opting\u00a0for bigger loans with smaller deposits. The study was taken by comparison website RateCity and\u00a0Sally Tindall, Money Editor for Rate City joins me to discuss the findings….<\/p>\n","protected":false},"author":176692471,"featured_media":7539,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[34,10,11,13,17,25,27],"tags":[104],"class_list":["post-7538","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment","category-sponsored-channels","category-trends-topic","tag-podcats"],"yoast_head":"\nBigger loans, smaller deposits - Sally Tindall - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/bigger-loans-smaller-deposits\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bigger loans, smaller deposits - Sally Tindall - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  A study of more than 3,000 potential mortgage customers has found an alarming number of people are opting\u00a0for bigger loans with smaller deposits. 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