Tighter lending criteria and reduced LVR’s will safeguard against a housing price blow-out as record low rates continue to spur an upswing in the lower end of the property market, Mortgage Business reports today.

Housing has become more affordable as a result of a 400 basis point drop in the RBA’s cash rate that has seen the average standard variable home loan rate fall by a similarly large 375 basis points.

A mortgage business straw poll revealed that almost half of the 417 respondents – 47 per cent – are concerned that the increased activity at the lower end of the market could trigger a blowout in house prices.

But lending activity does not show a similar upswing with the latest ABS data revealing the total value of monthly home loan commitments in January was up by just under 10 per cent, compared to September last year.

In an interview with Mortgage Business, John Edwards, CEO of property analyst Residex, said the limited availability of credit made a property price bubble less likely.

“Yes low interest rates will bring buyers back into the market but there is a new limitation out there – credit. Banks are definitely tightening up on lending and this should help to subdue any property bubble.”

Lending criteria has tightened over the past few weeks with CBA and ANZ announcing that they will now only lend up to a maximum of 90 per cent LVR. Other major lenders have recently introduced genuine savings requirements around the 3 to 5 per cent mark.
Source: Mortgage Business