What you should know
Over the past 12 to 24 months, mortgage lending has tightened up significantly. This is due to the regulators getting nervous of the heated Sydney and Melbourne property markets. Banks have increasing pressures on them to stay in certain thresholds, such as a maximum of 30% of their loans being interest only and no more than 10% year on year growth for investment loans. The changes have made an impact to lending and are here to stay. Some of the major changes are as follows:
Borrowing capacity: The amount of mortgage available to you is dependent on numerous factors, i.e. your income, expenses, number of children, your age etc. Each individual lender calculates this in a similar way, however some lenders can be more generous than others. Some lenders scrutinise certain incomes, such as overtime and bonuses and won’t take some incomes into consideration. i.e. Centrelink income, though other lenders will.
Most recently, banks have tightened up how much of a loan they will give you. This is mainly due to lenders increasing their ‘assessment rate’ and ‘living expenses’.