Banks get tough

Money Magazine Australia - - IN BRIEF -

Spurred by the Aus­tralian Pru­den­tial Reg­u­la­tion Author­ity (APRA), the big banks and their sub­sidiaries are tight­en­ing their lend­ing cri­te­ria for bor­row­ers.

Com­mon­wealth Bank has in­tro­duced new tests for as­sess­ing loan ser­vice­abil­ity, in­clud­ing a 30% ser­vice load­ing for new cus­tomers with ex­ist­ing loans from other lenders. For ex­ist­ing CBA cus­tomers, there will be an in­ter­est rate buf­fer of 7.25%, or the cur­rent prod­uct’s in­ter­est rate plus 2.25% mi­nus any ex­ist­ing rate con­ces­sions, which­ever is higher.

CBA also re­cently changed its in­tere­stonly loan cri­te­ria, with higher rates, lower dis­counts and big­ger de­posits.

Bankwest, a CBA sub­sidiary, has lifted its in­ter­est rates by 0.75% for bor­row­ers with loan-to-value ra­tios (LVR) – in­clud­ing lenders mort­gage in­sur­ance – greater than 95%.

Mac­quarie is also tight­en­ing its el­i­gi­bil­ity cri­te­ria, with re­ports sug­gest­ing that the bank has be­gun to query the de­tails of its cus­tomers’ per­sonal spend­ing.

NAB re­cently an­nounced that it would cap LVRs for new in­tere­stonly bor­row­ers at 80%.

The changes come on the back of APRA’s push to limit new in­ter­est-only loans to 30% of new res­i­den­tial mort­gage lend­ing, and to re­strain lend­ing growth to bor­row­ers with high LVRs.

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