Rich picking in new-age loans
A pilot project from ANZ is set to reshape the mortgage landscape as the major banks move to carve out the richest borrowers offering exceptional deals.
Powered by new generation industry analytics that can pinpoint wealthy hotspots, the mortgage deals are strictly for top-end borrowers – in fact the offer is restricted to just 145 postcodes among the nation’s 3333 address zones.
Among the chosen postcodes are Sydney’s iconic waterfront locations such as Double Bay, Rose Bay, and Bronte.
Mortgage brokers are testing the new loans – which can be interest-only – across the market this month with several operators distributing them to those who have an income of $400,000 or more. Rates on the loans are in line with the broader market with about 0.35 per cent more added to the bill for the customised nature of the deals.
Banks, such as ANZ, have been restricted in recent years in expanding their loan books after the prudential regulator put in a raft of new rules including tighter terms around serviceability on mortgages.
The banks have got around the problem by strictly delineating the market into richer and poorer – the richer will have better creditworthiness and will be financed separately.
Under the terms of the deal buyers must invest at least $2m – though they can borrow up to between $5m and $8m and there is no need for mortgage lenders insurance.
“The local banks had to move here, they were at risk from new players and foreign private banks who have been threatening to cherry pick the top end of the market; it’s going to get competitive very quickly,” adviser Will Hamilton of Hamilton Wealth Partners says.
Leading global banks such as Goldman Sachs and Bank of Singapore have been circling the reviving Australian residential market in recent months.
“I can see why they are doing it and I don’t blame them with the limitations set by regulation, but it will segregate the market in a way we have not seen before,” says BuyersBuyers group cofounder Pete Wargent.
Curiously, it was ANZ’s outgoing boss Shayne Elliott who complained most loudly about the tightening of banking regulations for mortgages, saying in November last year: “If you want a loan, you have to be better off, and essentially rich”.
Elliott was complaining specifically about the mortgage service regulation test where banks must add 3 per cent to stress test a loan – in other words if you want to borrow at 7 per cent, the bank assesses your ability to repay on the basis it is actually 10 per cent.
Christian Stevens of the Flint Group, which is among the distributors of the new style loan, said: “It could be used to refinance or purchase applications, for owneroccupied or investment properties with principal and interest or interest-only repayments – for customers who are self-employed, PAYG and foreign income expats too.
“You would only need a deposit of $245,000 to purchase a property for $2.5m and save circa $60,000 in lenders mortgage insurance costs, not to mention the ongoing interest savings.”