HOME owners are being offered bigger discounts on increasingly large mortgages as banks seek to breathe new life into the lending market.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
People who borrow more than $250,000 can secure at least 0.7 per cent off the interest rate on a standard variable mortgage and 0.8 per cent if they opt for a $500,000 loan.
That is cutting the current headline rate on a home loan from 7.8 per cent to 7 per cent as the banks engage in a tit-for-tat battle to bolster their mortgage books at a time of subdued credit growth.
The broker Goldman Sachs last week cut its forecasts for housing loan growth to 2.9 per cent for the second half of 2011 which would result in a rise of just 6 per cent for the year.
As well as increased discounts, major lenders have loosened the limits on the percentages of the total amounts they are prepared to advance with a deposit. The limits were cut to as low as 80-85 per cent after the global financial crisis as borrowers were required to contribute more of their savings.
But in the quarter beginning in February the country's biggest lender, the Commonwealth Bank, has increased its loan-to-valuation ratio from 90 per cent to 95 per cent, according to the latest research compiled by Deutsche Bank.
CommBank is also offering a discount of 0.75 of a per cent on its standard interest rate of 7.81 per cent for those who borrow between $250,000 and $500,000, a cut of 0.85 per cent on loans up to $750,000 and a reduction of 0.9 per cent on mortgages above that amount.
Westpac, which lies second in the house lending league, is now allowing home owners to borrow 85 per cent of their loan without taking out mortgage lenders' insurance - cover that protects banks if people default on their loans.
It has also reduced the amount required for a deposit from 10 per cent of the total to 5 per cent. Westpac is offering similar interest rate discounts to the CBA.
The group's St George subsidiary has followed suit and is offering a slightly higher discount of 0.8 per cent as it targets loans in the $250,000 to $500,000 range.
National Australia Bank, which has cut the basic price of loans to win more business and recently launched an online-only mortgage offer of 6.59 per cent, is offering slightly lower discounts than its rivals.
Deutsche Bank's "mystery shopper" research shows, though, there is little difference between the big four banks and the five regional banks, two of which, St George and BankWest, are owned by the majors.
However, it said NAB price-cutting over the past six months had spurred CommBank, Westpac and ANZ into action.
