Major bank scraps LMI, flags deposits as low as $31,000 – realestate.com.au

A major Australian bank has scrapped Lenders Mortgage Insurance in a major move that could see deposits fall by up to $31,000 in some inner-city suburbs.

Ubank’s move will shake up the competition nationally and save hundreds of thousands of dollars on mortgage costs in Australia, offered to both owner-occupiers and investors – amid a huge rise in first home buyers nationally.

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UBank has scrapped LMI because of its special 10 percent deposit program.

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The new Flex and Neat home loan with a 10 percent deposit is aimed at both owner-occupiers and property investors with principal and interest repayments and no LMI.

UBank chief lending officer Ray Jokhan said their new 10 per cent deposit, no LMI home loan, would also give “real hope” to younger buyers keen to enter the property market earlier and build equity over time.

“We’ve already seen customers become more likely to purchase with our existing 15 percent down payment product, using it as a stepping stone to their first home. As they build equity and their loan-to-value ratio drops below 80 percent, they qualify for better rates – and we regularly review these with them.”

The 10% no-LMI offer also opens the door to more rental investment, the bank said – a trend that sees a growing number of first home buyers choosing to rent where they want to live, while purchasing properties in more affordable markets.

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Suburbs where houses have the lowest cordon levels within 10km of the state capital’s CBDs. Source: Ubank/Cotaity.

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Based on current lending criteria, UBank expects that with a deposit of approximately $60,000 and a PAYG income of $125,000, some eligible customers may be able to purchase a property within the $450,000 range.

Research from UBank has shown that the dollar difference between a traditional 20% deposit and UBank’s 10% home loan without LMI is quite significant – with savings of up to $175,000 upfront, depending on the suburb.

QLD

One of the most accessible housing markets within a 10km radius of Brisbane’s CBD is Rocklea, where a 10% deposit based on average prices would be around $80,000. UBank research shows Gailes is an affordable market with a 10% deposit of $70,000, while Spring Hill and Woodridge’s unit deposits would be $62,000 and $46,000 respectively.

N.S.W

UBank has discovered Sydenham as the most affordable housing market within 10km of the Sydney CBD. Compared to the rest of the country, a 10% deposit was significant at $175,000, but it was also $175,000 less than the 20% threshold for anyone looking in the area, and about $170,000 less than a 10% deposit for the average Sydney housing market.

For units, the choice was Harris Park, 12 miles from the city, where a 10% deposit hurdle was just under $50,000, and almost $50,000 less than the traditional 20% deposit hurdle.

VIC

Maidstone in Melbourne’s west was one of the most affordable suburbs within 10km of the CBD for house hunters, with a 10% deposit of around $86,500 – about half the traditional 20% deposit. Further afield, Coolaroo’s is even cheaper at $61,000, 17km north of Melbourne CBD.

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Lightsview’s 10% deposit offered upfront savings of around $80,000 on the normal 20% threshold, UBank found, while Brahma Lodge came in at just under $69,000 further out, but within 20km of the CBD.

WA

Perth’s Westminster has a 10% deposit of $71,000, UBank said, while Glendalough units 5km from the CBD fetched about $48,000.

THAT

Hobart’s Glenorchy was a standout with a deposit of around $46,000 for a 10 per cent deposit for an average home, while homes in Clarendon Vale cost around $49,000 for a mid-range home.

NT

Units in Gray, Darwin have a 10% deposit level of $31,000.

ACT

Scullin in Canberra has a deposit level of $86,000 (10 per cent), given the median house value of $859,000 within 10km of the CBD, while Greenway’s slightly further afield was $62,000.

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