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ISSUE 3: LOW-DOC LENDING IN AUSTRALIA

Issue 3 of Genworth’s Spotlight Series discusses the emerging trends of low-doc lending in Australia, stating that the main factor driving demand for this type of mortgage is the growing number of contract and self-employed workers in Australia.

Highlights include:

  • Over 39% of the current Australian workforce is deemed to be self-employed, highlighting the potential for the product to grow
  • While there is greater risk associated with offering loans to self-employed borrowers, with proper safeguards in place, and risk offset by LMI, the opportunities for prudent lenders should continue to expand.
  • The recent US experience has led to some confusion about the difference between prime low-docs and sub-prime low-docs, which are designed for credit impaired borrowers and feature higher interest rates