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Around a third of all new loans have a loan to value ratio above 80%

Data from APRA shows that over the September 2014 quarter, 33.0 per cent of new mortgages from Australian ADIs had a Loan to Value ratio ( LVR) of 80 per cent or more.

Breaking the data down further:

  • 25.2 per cent of new mortgages had an LVR of less than 60 per cent
  • 41.8 per cent had an LVR of between 60 per cent and 80 per 
  • 20.9 per cent had an LVR of between 80 and 90 percent and 
  • 12.1 per cent had an LVR of more than 90 per cent.

home loan

Interestingly, compared to data from the same time a year earlier, loans with an LVR of more than 90 per cent was the only segment to experience a decline, down 3.8 per cent. On the other hand, loans with an LVR of between 60 per cent and 80 per cent have recorded the greatest annual increase, up 16.8 per cent.

It is important to remember that in Australia virtually all mortgages taken out with an LVR of more than 80 per cent are mortgage insured.

Mortgage insurance is paid by the borrower and protects the lender against loss on that mortgage.

Of course, there remains a high proportion of borrowing above an 80 per cent LVR however, mortgage insurance does act as an incentive for many to save a greater deposit before purchasing to avoid this additional cost.

LVR Band

Source Corelogic Property Capital Markets Report 2015



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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Around a third of all new loans have a loan to value ratio above 80%' have 4 comments

  1. Avatar for Property Update

    May 4, 2015 @ 9:11 am Hamish

    Michael can you please provide a guide as to how much LMI adds to the loan as a percentage.
    I presume it might be higher for a construction loan for a property development compared to an established dwelling.

    Also – for an investment property, is it the case that while you might borrow 100% of the purchase price, if there is equity elsewhere e.g. own home, then the LVR could be calculated across both properties. If the combined LVR was below 80%, then the need for LMI might be removed?

    thanks
    Hamish

    Reply

    • Avatar for Property Update

      May 4, 2015 @ 9:39 am Michael Yardney

      Hamish
      I don’t know that you can get LMI for construction loans. As for investment loans – it depends how much LMI you’re taking – that’s a question for your broker

      Reply

  2. Avatar for Property Update

    May 4, 2015 @ 12:04 pm Margaret

    My concern with this article is that the data may not be a true indicator of LVR exposure. Although 33% are above 80% LVR, may not necessary mean that % of people are exposed, have utilised all the funds. What if it serves as a buffer only or funds are drawn down for further investment but not used, or for rainy day? Say, I was 50% LVE but just refinanced to 80% LVR, but did not utilise the funds?

    Reply


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