ANZ launches pilot mortgage product with a special deal for selected postcodes

ANZ chief executive Shayne Elliott has complained regulations restrict mortgages to the richest. Picture: Arsineh Houspian

A pilot project from ANZ is set to reshape the mortgage landscape as the major banks move to carve out the richest borrowers offering exceptional deals.

Powered by new-generation industry analytics which can pinpoint wealthy hotspots, the mortgage deals are strictly for the top-end borrowers; in fact the offer is restricted to just 145 postcodes among the nation’s 3333 address zones.

Among the chosen postcodes are Sydney’s waterfront locations such as Double Bay, Rose Bay and Bronte.

Mortgage brokers are testing the new loans – which can be interest-only across the market – this month and several different operators are distributing them to those who have an income of $400,000 or more.

Rates on the loans are in line with the broader market and about 0.35 per cent more is added to the bill for the customised nature of the deals.

Banks such as ANZ have in recent years been restricted in expanding their loan books after the prudential regulator put in a raft of new rules, including tighter terms around serviceability on mortgages.

The banks have got around the problem by strictly delineating the market into richer and poorer. The richer will have better creditworthiness and will be financed separately.

Under the terms of the deal buyers must invest at least $2m although they can borrow up to and between $5m and $8m – and there is no need for mortgage lenders insurance.

“The local banks had to move here; they were at risk from new players and foreign private banks who have been threatening to cherry pick the top end of the market. It’s going to get competitive very quickly,” Hamilton Wealth Partners adviser Will Hamilton said.

Global banks such as Goldman Sachs and Bank of Singapore have been circling the revived Australian residential market in recent months.

Property adviser and author Pete Wargent said: “I can see why they are doing it and I don’t blame them with the limitations set by regulation, but it will segregate the market in a way we have not seen before.”

Curiously, it was ANZ’s outgoing boss, Shayne Elliott, who complained most loudly about the tightening of banking regulations for mortgage, at the time saying: “If you want a loan, you have to be better off, and essentially rich.”

Mr Elliott was complaining specifically about the mortgage service regulation test whereby banks must add 3 per cent to stress test a loan; in other words if you want to borrow at 7 per cent the bank assesses your ability to repay on the basis that the loan is actually 10 per cent.

According to Christian Stevens of the Flint Group, who is among the distributors of the new style loan, “it can be used to refinance or purchase applications, for owner occupied or investment properties with principal and interest (P&I) or interest-only repayments – for customers who are self employed, PAYG and foreign income expats too”.

“You would only need a deposit of $245,000 to purchase a property for $2.5m and save circa $60,000 in lender’s mortgage insurance costs, not to mention the ongoing interest savings.”

A similar range of “mortgages strictly for the rich” was launched in the UK banking market in recent years, and interest-only options proved to be the most successful item on the menu.

However, as the mortgages aimed only at those with £300,000 or more in annual income (about $570,000) became more popular, they were regularly criticised for carving out one segment of the market for special treatment.

Critics thought the availability of exclusive interest-only loans which might never be repaid –unless the home is sold – meant that the loans were offering some customers a perennial advantage after reports they were being effectively passed between generations during inheritance settlements.