ANZ Bank asks for larger home deposits in areas expecting a drop: reports

ANZ Bank asks for larger home deposits in areas expecting a drop: reports

ANZ Bank is asking some new customers to increase their home deposits to hedge the risks of a downturn before they approve a mortgage in some Australian suburbs, Mark Hand said, group executive of retail and commercial banking.

"It is not a blanket approach to the whole of Australia, but there are pockets where we won't lend beyond an 80 per cent LVR (loan to value ratio),” he said, according to the AFR.

“There are pockets that have certain property types – particularly at the top end of luxury properties – where we have more conservative appetite of sub-70 per cent (LVR) in some cases.”

The comments, reportedly made at the bank’s third annual environmental, social and corporate governance briefing on Monday, followed questioning on the effects of Melbourne’s prolonged lockdown on property prices.

They come after ANZ executives told a parliamentary committee on Friday that property prices are expected to drop by 10 to 15 per cent during the recession. 

ANZ customers on a ‘mortgage holiday’

ANZ has 84,000 customers who have deferred their home loan repayments, as of July 2020, accounting for 9 per cent of its home loan portfolio. 

Mr Hand said historically low interest rates would help struggling customers cope in the tough economic climate.

The bank could offer suitable customers the option of extending their loan term or converting to interest-only loans to help reduce their repayments.

“(We’ll give them) as much breathing room as we can to help them get back on their feet", he said.

Not all customers will be able to coast through the pandemic unscathed. Mr Hand said last month it may be in the best interest of some customers to downsize their homes

"The growth that you might have anticipated (in your property) might not come, so at some stage you’re going to have to say: ‘If I can’t afford this mortgage, am I better off to rent, put my capital aside and wait until I’m in a better position to buy back into the market?’,” he said.

"I just think there are people who are going to have to make those decisions in the next few months."

The toll of a second outbreak

Victoria’s economic recovery has been delayed due to a second COVID-19 wave, causing it to fall behind other states and affect the nation’s economic bottom line, according to the Reserve Bank of Australia (RBA).

Melbourne recently became the capital city with the highest proportion of property vacancies in Australia after dethroning Sydney, driven largely by Victoria’s stage four restrictions coupled with a decrease in international students and visiting migrants.

But as its property woes worsen, other states appear to be recovering, with rebounds in both consumer and business confidence.

Banks are already checking in to see if half of all mortgage deferrals -- about 450,000 in September and October -- are ready to resume payments six months into the pandemic.

RBA Governor Philip Lowe said the economy’s recovery is contingent on its containment.

“We expect the (second) outbreak will reduce (Victoria’s) GDP growth in the September quarter by at least 2 percentage points,” he said, in an opening statement to a parliamentary committee last month.

“This will broadly offset the recovery that has been taking place in most other parts of the country. 

“As a result, we are now not expecting a lift in economic growth until the December quarter.”

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How much are repayments on a $250K mortgage?

The exact repayment amount for a $250,000 mortgage will be determined by several factors including your deposit size, interest rate and the type of loan. It is best to use a mortgage calculator to determine your actual repayment size.

For example, the monthly repayments on a $250,000 loan with a 5 per cent interest rate over 30 years will be $1342. For a loan of $300,000 on the same rate and loan term, the monthly repayments will be $1610 and for a $500,000 loan, the monthly repayments will be $2684.

What happens to your mortgage when you die?

There is no hard and fast answer to what will happen to your mortgage when you die as it is largely dependent on what you have set out in your mortgage agreement, your will (if you have one), other assets you may have and if you have insurance. If you have co-signed the mortgage with another person that person will become responsible for the remaining debt when you die.

If the mortgage is in your name only the house will be sold by the bank to cover the remaining debt and your nominated air will receive the remaining sum if there is a difference. If there is a turn in the market and the sale of your house won’t cover the remaining debt the case may go to court and the difference may have to be covered by the sale of other assets.  

If you have a life insurance policy your family may be able to use some of the lump sum payment from this to pay down the remaining mortgage debt. Alternatively, your lender may provide some form of mortgage protection that could assist your family in making repayments following your passing.

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We update our product data as soon as possible when lenders make changes, so if a bank hikes its interest rates or changes its product, the system will quickly re-evaluate it.

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How common are low-deposit home loans?

Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.

However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.

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What do mortgage brokers do?

Mortgage brokers are finance professionals who help borrowers organise home loans with lenders. As such, they act as middlemen between borrowers and lenders.

While bank staff recommend home loan products only from their own employer, brokers are independent, so they can recommend products from a range of institutions.

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