Banks are demanding large deposits from home buyers in Australia’s mining towns

Brendon Grylls, Western Australia’s minister for housing, calls lenders’ policies which require prospective homebuyers to cough up deposits of 30% in once thriving mining towns a “hangover” from the end of the mining boom.

With Australia’s mining industry facing its worst downturn in a century, the area’s decade-long investment boom has also come to an end. ANZ Banking Group was the first among the Big Four to enforce the 30% down payment policy in June 2015.

More than 40 postcodes across Australia have been affected by ANZ’s policy, including Port Hedland, Western Australia’s iron ore hub. Prospective homebuyers who want to purchase an average-priced home in the town now require a $135,000 deposit.

In Kalgoorlie-Boulder, where the average house price has fallen from $345,000 to $320,000 in the past year, prospective homebuyers need a deposit of $100,000 if they want to take on a mortgage with ANZ.

During a recent visit to Kalgoorlie-Boulder, Grylls told the media he’d asked Keystart Home Loans, which provides low-deposit home loans to West Australians unable to meet the deposit requirements of mainstream lenders, to come up with strategies to help first-home buyers enter the market.

“I've asked Keystart to have a specific policy around higher deposits required in regional areas that have been the hangover I suppose, of the mining boom,” Grylls said. “We had a mining boom party but not everybody got invited. And now everyone has the hangover.”

ANZ is not the only major lender to come down hard on borrowers in mining towns, where property values are usually linked to commodity price swings. NAB also requires a 30% deposit for borrowers in the Goldfields’ mining towns, except Kalgoorlie-Boulder, where homebuyers can borrow up to 90%, subject to lenders mortgage insurance.

Bankwest will lend 90% in Kalgoorlie-Boulder, but usually requires 50% upfront for smaller Goldfields towns where it has no branch presence.

Westpac applies a 70% loan-to-value ratio in some mining jurisdictions, where borrowers need to have a 30% deposit (these locations are part of the bank’s confidential credit policies).

Commonwealth Bank of Australia operates on a case-to-case basis.

Fortunately for first-home buyers, smaller lenders require less exorbitant deposits. “There [are] certainly some lenders still happy to operate with a five per cent deposit. It's not a shopping list full of them, but still some, so there remains some choice in that space," one broker who spoke on condition of anonymity said.