Warning to home buyers as banks make obtaining a home loan easier With interest rates unlikely to move in the next quarter, competition is expected to increase this year. LENDERS are making it ­easier for homebuyers to get mortgages and promising fierce competition as the property market heats up. The majority of home loans lenders are allowing deposits of 5 per cent or less and some mortgage brokers have no ­deposit loans schemes. "It's definitely an extremely hot market," Alex Parsons, CEO of leading financial ­comparisons website RateCity, said. Competition is fierce. Mr Parsons said lenders were loosening their purse-strings close to pre-Global ­Financial Crisis levels, which peaked at 86 per cent in 2008 but fell back to 49 per cent in 2010. Banking watchdog, the Australian Prudential Regulation Authority found the number of new residential loans approved with deposits of 10 per cent or less rose by a fifth in the six months to September. An analysis by RateCity shows 70 per cent of the 2800 home loan products on database are now allowing deposits of ­5 per cent or less. Damian Hackett of Place real estate said: "There is no doubt the banks have freed up, totally." Sunshine Coast agent Tom Offermann said bank finance seemed "plentiful and bankers are competing strongly for the business." "Valuations are now matching or more in line with the contract prices," he said. Mortgage and Finance ­Association of Australia CEO Phil Naylor said smaller banks and non-bank lenders were looking for ways to reduce the domination of the Big Four banks which has more than 80 per cent of the mortgage market. With interest rates unlikely to move in the next quarter, Mr Naylor said competition would increase this year. "Smaller lenders' rates are up to 1 per cent lower," he said. Borrowers seeking 80 per cent or more of the property price are required to take out expensive lenders mortgage insurance. But some lenders are coming up with deals to remove the need for buyers to come up with any deposit or mortgage insurance. With loans of up to 120 per cent of property values on offer, consumer groups are warning borrowers to beware of taking on too much risk. RAMS home loans brand and marketing head Chris Thornton said their "fast track" initiative was popular with first-home buyers struggling to find a deposit. It allows parents or siblings to guarantee the loan for a limited amount with a mortgage over their own property. RAMS is promoting loans of up to 120 per cent of property valuation to cover upfront costs, home improvements and debt consolidation. Under an example on their website, a customer could borrow $350,000 without a deposit or mortgage insurance if his parents gave an $87,500 guarantee. Mr Thornton said the risk was limited. All parties go in with their eyes open. We recommend all parties get independent legal advice. But consumer advocates are urging caution. Choice spokesman Tom Godfrey said: "We're hearing stories of banks lending up to 15 or 20 per cent over the value of the actual home," he said. An Australian Bankers ­Association spokeswoman said: "Australian banks lend ­responsibly and are required by law to do so."