Fierce mortgage competition between the majors is seeing credit standards eroded, a lender has claimed.

LJ Hooker Finance general manager Peter Bromley has accused the major banks of relaxing lending standards to a dangerous degree in their bid for new mortgage business.

"To attract new customers in an increasingly competitive market, the big banks have loosened LVRs to a point where borrowers need only a 5% deposit. It seems that some lenders have already forgotten about the causes and the ongoing impact of the global financial crisis," he said.

LJ Hooker Finance has cut rates on its Classic Home Loan Range for LVRs of 75% or lower by 20bps, and Bromley said the move highlights responsible lending standards. Bromley said low credit demand could tempt lenders to relax standards, but that the industry needs to find other ways to attract borrowers.

"The subdued mortgage market requires an innovative approach to attract customers. However, lenders need to provide their brokers with attractive products and services that also promote responsible lending," Bromley said.

LJ Hooker has stated the discounted rates will be available for all applications received between 1 August and 30 October which reach formal approval by 15 November. The rate cuts will apply for the life of the loan, and will bring the lender's Standard Classic Home Loan to 6.79%, and its Pro Pack Classic Home Loan to 6.69%. Bromley said the discounts would not eat into broker commissions.

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