Fixed rates for Low Doc Loans on the move up again. Low Doc Loans are getting more expensive. In the last six weeks we have rates for fixed rate low doc loans move over one percent.
As a footnote to the above, CBA are now requiring BAS statements with their 80% low doc loans. There is still alternative low doc finance out there at 80% for both purchases and refinances that do not need BAS.
RAMS has increased its fixed rates for low doc loans today for loans 1-5 years
Further effective 24 September 2009
All RAMS Low Doc loans applications are to be supported by the following:-
1. Business Activity Statements (BAS) for the past 12 months and ATO Lodgement Reference Number AND
2. The last 3 months account statements evidencing payment of tax as advised on the BAS.
As a footnote to the above, RAMS and many of the major banks are now requiring BAS statements with their low doc loans. With a requirement for BAS is this really a low doc loan? There are still alternative low doc lenders out there at 80% for both refinances and purchases that do not need BAS.
Low Doc Loans have been around for many years. Previously low doc loans were done through solicitors funds at around 66%.
Over time, the banks then started to slowly start to enter this space. In 2005, the RBA commented about Low Doc Loans.
For the full article.
With the beginning of the credit crisis in 2008, there was a general tightening of lending across the board. Much of this was to do with bad credit. There has been confusion between bad credit and Low Doc Loans. In Australia they are different. Most Low Doc loans in Australia are for self employed with minimal paperwork and are normally clean credit.
Standard & Poor’s in October 2009, has indicated Low Doc Loans in Australia are not a problem.
Standard & Poor’s has backed the government’s decision to direct the Australia Office of Financial Management to invest in residential mortgage backed securities with a higher proportion of small business loans when it invests the additional $8 billion the government has allocated to support new RMBS issues.
For the full article.
Low Doc Loans are still being written, but they change as the credit markets change. With the norm for the banks now being 60%, Low Doc Loans have effectively gone full circle. Low Doc Loans without BAS at 80% are still possible, however they will be priced according to risk.
With this in mind, even though lending for Low Doc Loans has tightened, with the credit markets starting to free up again, over time, Low Doc lending will also start to free up again as well.
If you want to know the future for Low Doc Loans, one guide is to look at the general credit markets. When things are perceived as bad, low doc lending will be tight. When things are perceived as optimistic, low doc lending will be more liberal.
Since writing this post in late 2009, in March 2010 Macquarie has already returned to the low doc market. This is an indication of where we are heading and it has happened quite quickly.
Given the current credit climate it may also be timely to remind customers of the risks associated with Low Doc Loans. The following from ASIC may help.
The above is information only and not advice.
