Australia banks tighten mortgage checks
Australia’s largest banks have stepped up screenings of mortgage loan applications amid a powerful government-backed inquiry into the nation's lenders and their sales practices, potentially hurting revenues from their most lucrative products.
National Australia Bank communicated on Friday to mortgage brokers its stricter conditions to assess mortgage applications, according to emails seen by Reuters, becoming the latest of Australia’s ‘Big Four’ banks to do so.
Citing regulatory concerns, the country’s fourth-largest lender by market value, went a step further than rivals and lowered the amount it is prepared to lend - to a ratio of seven times a borrower’s income from eight times previously. Westpac Banking Corp, Australia and New Zealand Banking Group, and Macquarie Group have also communicated to brokers in recent weeks changes in the way loans are assessed and approved, according to the emails reviewed by Reuters.
The stricter screening processes include emphasising accuracy of loan application details and employing methods to better estimate the living expenses of potential borrowers. Mortgages are Australian banks’ money-spinners, with the Big Four — Commonwealth Bank of Australia, ANZ, Westpac and NAB - holding about 80 per cent of the country’s A$1.7 trillion ($1.36 trillion) mortgage market.
Australia’s big banks are among the most profitable in the world and the sector is a key contributor to the nation’s economy. The lenders have been under regulatory pressure to boost capital and rein in lending to speculative investors amid fears of a downturn in the property markets of the country’s biggest cities.