Low-doc loan demand falls

Analysis of APRA data by comparison website finder.com.au has found that low-doc loans made up $38.7 billion (3.4 per cent) of all home loans on ADI books as at December 2013 (total loans $1.15 trillion) – the lowest total value and lowest proportion of low-doc loans recorded since March 2008.

The analysis found $459 million (0.5 per cent) of new loan approvals were low-doc loans – the lowest value since March 2013 and the lowest proportion ever recorded.

There are also 12 per cent fewer low-doc loans available in the market than four years ago – in 2010 there were 82 low doc loans compared to 72 low doc loans in April 2014.

Industry leaders have been quick to point out the reluctance of brokers to write low-doc loans since the GFC.

Aussie Home Loans executive director James Symond believes low-doc loans will experience growth, provided brokers view them through “the NCCP lens”.

“Brokers now have to come out of the GFC and look through the NCCP lens and understand that it is an alternative verification, it’s an alternative approach to it,” Mr Symond said.

“It’s not that low-doc loans are wrong or not allowed; it’s about how you satisfy the NCCP requirements in order to assist those borrowers,” he said.

“We are going to see some growth in that area there is no doubt, but it will be again very much around what brokers are comfortable with, the nature of their customers.”

Mr Symond said brokers looking to diversify their product and lender set will be the ones that will do well with a low-doc approach.

After re-entering the Australian mortgage market last year, specialist lender Bluestone admits low-doc loans have been tarnished by the GFC and brokers are unwilling to write them as a result.

Bluestone chief executive Peter Wood said there is a perception among brokers that low-doc loans are non-compliant.

“They are not touching them,” Mr Wood told Mortgage Business.

“When in actual fact when writing a non-conforming loan or a prime loan you need to do exactly the same thing,” he said.

“It is just an education process of taking brokers through it and reassuring them that it is completely fine to write non-conforming loans as long as it complies with the regulator.”