Foreign borrowers targeted in ANZ's property lending crackdown
29 March 2016
Duncan Hughes
ANZ has closed the door on some overseas' buyers wanting to invest in Australian real estate.
The bank, which announced its last review for overseas' buyers only four months ago, also announced tougher rules for other borrowers to prevent fraud and money laundering.
They include insisting on original copies of untranslated supporting documents required for a loan application and tightened passport scrutiny, such as foreign applicants having to provide all stamped pages.
It comes amid concerns by developers that a decline in bank lending to investors, capital controls imposed in China and confusion about state planning policies, particularly in Melbourne, might slow investments.
Mortgage brokers claim the moves are targeting the Chinese market, which has spent billions of dollars on Australian residential property, particularly in Melbourne and Sydney.
From today, the bank will not accept loan applications based solely on foreign income. "Applications based on 100 per cent foreign income will not be accepted," the bank is telling mortgage brokers.
For borrowers seeking loans with a loan-to-value ratio (LVR) – which is a ratio of the loan to the value of the asset purchased – of more than 50 per cent there are measures about the size and source of funding.
For example, there is a maximum LVR of 70 per cent, no loans in a company name, no guarantor arrangements and restricted construction lending.
There are tough controls on refinancing of existing loans, which involves borrowers attempting to get better terms and conditions for their loans.
During the past 12 months there has been a more than three-fold increase in the number of borrowers considering refinancing, according to recent analysis by JP Morgan.
In addition, foreign salary earner applicants must pass six stringent documentation tests that include providing comprehensive employment contracts, tax returns, current visa documentation and original, untranslated supporting documents.
Self-employed applicants will need to provide confirmation the business has been running longer than two years and details of ownership structure.
Those borrowing less than 50 per cent of the property value will also have to provide additional documentation.
Expatriate Australians working overseas will not be impacted by the lending restrictions but will be required to provide the extra documentation.
The bank recently increased the range of products for which temporary, or provisional visa holders, will not be eligible.
Products still available include the fixed and standard variable home and residential investment loans.
The bank has told brokers that discretionary pricing might be available if there is "competitive justification for the request".