Banks get tough

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.