16 Jul ANZ, NAB tighten lending amid ‘game changing’ pressure from regulators
ANZ and NAB have continued tightening their mortgage lending products amid “game changing” pressure from regulators and the Hayne royal commission to obey responsible lending rules.
ANZ has increased rates on its fixed interest in advance loans by eight basis points, or about $800 a year in extra annual interest on a $1 million loan.
The product requires customers pre-pay a year of interest for the following year and the increase is partly in response to rising financing and compliance costs.
“We have made this change while making sure we still offer the most competitive rate of the major banks for products of this nature,” a bank spokesman said.
NAB has tightened credit applications by no longer inviting customers to apply for personal credit card limit increases.
The change applies to all customers, regardless of whether they previously agreed to receive the applications.
Other lenders are tightening analysis of government benefit payments when assessing applicants’ capacity to service the loan.
For example, Family Tax Benefits, a payment that helps eligible families with the cost of raising children, will no longer be accepted by several borrowers in a customers’ serviceability assessment once dependents reach a certain age.
Mortgage brokers, who act as intermediaries between lenders and borrowers, claim “unprecedented strictness” by lenders reviewing the income and expenses of their clients’ loan applications.
“They are making no exceptions,” a veteran broker, who did not wish to be named, said about lenders’ new approach.
The moves are the latest changes following increased pressure from regulators to lend responsibly and a succession of embarrassing disclosures during the banking royal commission about haphazard lending standards.
Investment bank UBS claims the royal commission is a “game changer” for Australian financial services, particularly increased focus by nervous management and boards on responsible lending laws.
“They are likely to be much more risk adverse,” according to UBS analyst Jonathan Mott.
“Further tightening of underwriting standards are highly likely across the industry,” Mr Mott said. “This could potentially lead to a sharp reduction in credit availability.”
ANZ, the nation’s third-largest mortgage lender, recently announced it is boosting scrutiny of clients’ personal identity, income, qualifications and capacity to repay loans amid evidence of wide-scale identity theft.
The bank, which is the most dependant of the major banks on brokers for distributing mortgages, is circulating “policy updates” about minimum evidence of borrowers’ income requirements needed to qualify for a loan. It is also warning brokers and employees new accounts can only be opened with the customer present at the branch.
NAB, which has about 15 per cent of the mortgage market, is tightening credit assessment of borrowers amid growing regulatory concern about household debt and loan serviceability across the industry.
The bank has reduced loan-to-income ratios from eight-times to seven, a full percentage point change following the introduction of the benchmark last September.
Top deals for some
But the banks are offering highly competitive deals to clients that meet their stricter lending criteria.
For example, NAB is offering first time home buyers 3.69 per cent on a two-year loan, for owner occupier, principal and interest borrowers.
Suncorp, the nation’s fifth largest lender, has cut rates on interest-only investment loans by up to up to 30 basis points following APRA’s decision to lift lending caps on borrowers.
Real estate companies and developers, who expect other lenders to follow, are hoping the move will reverse the investment lending plunge that has caused new borrowing to plunge nearly 18 per cent from market highs.