Mortgage borrowers to face postcode test of ability to pay CBA restricts loans

THE nation’s largest lender is tightening its belt and making it even tougher for potential borrowers to get a loan.

In a notice issued to mortgage brokers yesterday the CBA announced it will roll out a range of changes including restrictions on lending in some postcodes.

This includes forcing customers to stump up fatter deposits to get a home loan.

It will affect all types of properties including homes and apartments and also borrowers regardless of whether they are owner occupiers or investors.

It said from Monday, December 4 the key changes will include:

— Reducing the maximum loan- tovalue ratio from 80 to 70 per cent for customers without Lenders Mortgage Insurance ( an insurance the customer pays and protects the lender not the borrower.) This means borrowers with a deposit less than 30 per cent must pay expensive LMI costs.

— Reducing the amount of rental income and negative gearing eligible for servicing.

— Change eligibility for Lenders Mortgage Insurance waivers and LMI offers for customers in some postcodes.

CBA said the new Postcode Lookup tool which will start from Monday will allow the bank and brokers to determine whether a borrower can successfully borrow in a particular region or postcode and it will reduce customers wasting time applying where they are likely to get knocked back on a loan.

CBA has not released the postcodes and regions these changes will affect.

The move is a result of the responsible lending restrictions put on lenders by regulators to cool the red- hot lending market.

Home Loan Experts’ managing director Otto Dargan said these changes are significant and will affect many borrowers.

“Lenders keep an eye on the economy and their exposure to different property markets and adjust their lending policies to manage their risks,’’ he said.

“We strongly recommend that home buyers don’t commit to buy a property until they have an unconditional approval from a bank.

“You could win an auction and then find out that your pre- approval is worthless, and then what are you going to do?”

Unconditional approval is when your loan application has been fully approved and is not subject to any terms or conditions.