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ANZ and Westpac Group tighten grip on residential property
Australian Financial Review Feb 15 2018 1:11 PM
Duncan Hughes
Westpac Group and ANZ, which combined account for nearly 40 per cent of the nation's mortgage lending, are tightening control over borrowers with confidential changes to assessment, approval and monitoring.
ANZ, whose broker network accounts for about 56 per cent of mortgage flows, is clipping the discretion of frontline mortgage assessors that deal directly with mortgage brokers and customers in loan approvals.
Mortgage brokers claim banks appears to be showing less flexibility interpreting guidelines when assessing loan applications on issues such as some forms of irregular income, such as bonuses or part time work.
A bank spokesman said it is regularly reviewing lending practices "to make sure they are in line with community expectations and our own risk appetite".
"We recently added a higher level of approval for some discretions applied to our home loan police for serviceability assessments," he said.
It is not a change to credit policy or underwriting standards and applies to all home loans, not just those received through brokers, he said.
Lenders are toughening their lending criteria to new borrowers and cutting back on interest-only loans in response to pressure from regulators to reduce risk and lower demand in popular markets.
Westpac Group, which includes St George Bank, BankSA and Bank of Melbourne, relies on brokers for about 46 per cent of distribution and has about 45 per cent of higher risk interest-only loans in its mortgage book, the highest percentage of the big four.
The bank recently introduced stringent tests on residential property borrowers' existing and future capacity to meet their repayments.
It came amid pressure from prudential and consumer regulators to tighten lending criteria and an industry controversy that loans totalling $500 billion had been approved on the basis of applications that understate debt, or exaggerated income.
Called 'requirements and objectives', it is intended to identify possible scenarios that might impact on a borrowers' capacity to repay, including having dependents with special needs that might require long-term spending on care and treatment.
From Monday, February 26, brokers that make any changes to a submitted loan application, which might arise from further conversations with the borrower, need to alert the bank.
"We are implementing a new resubmissions process to ensure we have accurately captured all details of the loan application if it changes after it has already been submitted," the bank is telling brokers.
Other lenders are also introducing alert systems to monitor struggling property borrowers in a bid to head-off problem loans amid growing concern about household debt.
Under new arrangements being planned by Adelaide Bank, subsidiaries and affiliates, loan repayments will be routinely compared with borrowers' income and monthly to ensure it falls within guidelines.
Debts that exceed guidelines will prompt a "diary note commentary" to inform the lender of possible mortgage stress.
Adelaide Bank slashes property investor interest rates by up to 80 basis points
Australian Financial Review Feb 15 2018 4:27 PM
Duncan Hughes
Adelaide Bank is cutting interest-only rates for property investors by up to 75 basis points, reversing a recent trend for lenders to raise investor rates in response to regulatory concerns about rising prices and increasing risk.
The bank is reducing investment interest-only through its 'smartsaver' and 'variable smartsaver' products to 4.29 per cent for borrowers with a minimum deposit of 20 per cent.
It is also cutting principal and interest investment loans by up to 80 basis points to 3.99 per cent. The loans are offered through its broker network.
"We regularly review our pricing to support specific partner engagement so as to ensure we are getting the right balance in terms of a competitive offering and meeting our regulatory obligations," a Bank of Adelaide spokesman said.
Listed-lender Homeloans is also cutting investment interest-only loans for a minimum of $200,000 with a minimum deposit of 20 per cent by 30 basis points. The rates are also on offer through its mortgage broker network.
Regulatory concern about property investors borrowing too much and risking financial distress has resulted in limits on lenders writing new loans.
The average interest-only standard variable loan for an owner-occupier borrower of $500,000 borrower with a 20 per cent deposit has risen 22 per cent since the beginning of last year, according to Canstar, which monitors rates and prices.
A loan for the same owner occupier wanting a two-year interest-only fixed rate has jumped by 16 basis points, according to Canstar.
The rates for investors have risen by 44 basis points and 25 basis points respectively over the same period.
Other smaller lenders, such as Bank of Queensland and Suncorp, are also offering deep cuts to their advertised interest-only rates to boost their loan books, which are a key driver of profits.
For example, Suncorp recently increased discounts on investment loans of up to 180 points.
Adelaide Bank also recently announced a new system for subsidiaries and affiliates to routinely compare loan repayments with borrowers' income and monthly payments to ensure it falls within guidelines.
Debts that exceed guidelines will prompt a "diary note commentary" to inform the lender of possible mortgage stress.
This will automatically happen where the loan-to-income ratio exceeds five times or monthly loan repayments exceed 35 per cent of income.
Many lenders are responding to regulatory pressure and tightening lending criteria, typically by closer scrutiny of debt and income when the borrower applies.