Buyers working around rules: Harcourts

Since October, banks have only been allowed to lend one in 10 of their new loans to borrowers with a deposit of 20%.

But in the latest MarketWatch, Harcourts says that first-home buyers who were stopped in their tracks by the new LVR rules have since figured out that there are other ways around them. “Lenders have also adapted and are offering flexible and creative solutions.”

Duncan said that often meant using a non-bank lender, such as Resimac, which offers lending to borrowers who do not meet the 20% deposit threshold. Many lenders were doing deals with broker groups, he said.

But he said even mainstream banks were not checking where deposits had come from. Gifting had become a lot easier, he said, and people were raising money through other loans.

“You can take out a personal loan and go and apply for a mortgage with another bank. You’re borrowing more than 80% but across multiple banks,” he said.

It is something that the Reserve Bank seems to have its eye on.

Before Christmas, it issued a consultation paper saying it was not its desire to force banks to include a customer's personal loans and credit cards when calculating their LVR.

But it said it wanted lenders to work within the spirit of the rules, and proposed a new identification and verification requirement for deposits, so the banks would have to be aware of where each deposit had come from.

Duncan said he did not think the proposal would change anything. “It’s one thing for the Reserve Bank to say the banks should do something but the banks are in the business of lending money.  They’re incentivised heavily around their profitability and viability to lend.”