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A significant shift in lending criteria by Australian home loan lenders has been revealed by Australia’s best financial comparison website RateCity.

The research found that most lenders have changed the rules to lending eligibility from February this year, at the peak of the global financial crisis.

Damian Smith, RateCity’s CEO, said a tighter lending environment can cause more confusion to borrowers.

“The higher cost of funding for lenders and the volatility of the market saw most lenders getting tougher on lending criteria,” he said.

“These tighter rules are not always easy to find as it is up to each lender to decide on their lending guidelines.”

RateCity found the majority of 100 percent loan to value ratio (LVR) primary loans – which are loans that do not need a deposit – were taken off the market this year. Only three 100 percent LVR loans remain advertised on the market (not including no-doc or low-doc loans), compared to 653 recorded last year.

“Home loans with a maximum LVR of 97 or 98 percent are also very hard to come by now,” said Mr Smith. “In fact, our database shows only 19 loans offer a maximum LVR of 98 percent and 87 loans offer 97 percent LVR.

“But this is not to say that lenders won’t offer 100 percent loans now, they are much less public about offering high LVRs. Lenders will judge on a case-by-case basis and certain investments with good risk may be accepted.”

Mr Smith said the availability of higher LVR home loans is also more restricted.

“These loan amounts are not necessarily obtainable to everyone as many lenders have also reduced the availability of these loan amounts to existing customers in the last six months.

“For instance, a loan may have an advertised maximum loan to value ratio of 95 percent but it is only available to existing customers who have a credit facility – a credit card or personal loan – with that bank. Otherwise, someone off the street may only be able to take that loan out with a maximum LVR of 90 percent,” said Mr Smith.

Following the introduction of the Federal Government’s First Home Buyers Boost late last year, many lenders also changed their definition of “proven savings terms” to be a minimum 5 percent deposit of genuine savings excluding the government grants or boosts.

“This means that borrowers need to show a regular pattern of savings or a 5 percent deposit untouched in their account for at least six months,” said Mr Smith.

“For the average $270,000 home loan, first home buyers would need at least $13,500 of proven savings.”