ANZ tightens mortgage lending criteria
ANZ Banking Group will take a tougher approach towards property borrowers’ expenses from next month, a change that will mean some customers will be lose access to tens of thousands of dollars.
ANZ is the final big bank to toughen rules on living expenses, partly in response to concerns banks have issued loans too easily.
In a note to mortgage brokers, ANZ said it would change the way living expenses were calculated when it decides on home loans.
What the bank views as a “minimum” living expense will depend on the borrower’s income, the number of dependants they have, and whether the application is for a joint or individual loan.
The changes, to take effect from April 4, will reduce how much some prospective customers can borrow.
Information on the changes sent to mortgage brokers in March and included common scenarios, such as a hypothetical couple with two children wanting to buy a $500,000 investment property.
The slide pack says that due to the bank changing its estimate of such a couple’s minimum living expenses, the maximum amount they could borrow would fall more than $50,000.
At the same time, ANZ will tighten assessments of overtime pay, bonuses and commissions. It will also lower its interest rate “buffer” – a rate that tests how borrowers would cope if interest rates rose.
“We regularly review our retail credit policies to ensure that lending remains prudent and aligned with risk appetite in light of the competitive, economic and regulatory environment,” an ANZ spokesman said.
“For our customers, these changes are designed to ensure that we continue to assess any application for credit in a prudent way in view of their individual circumstances.”
The changes are the latest moves by a bank to take a more stringent approach to assessing customers for credit after the Australian Securities and Investments Commission last year said many were not being rigorous enough when testing whether customers could afford loans.
ASIC chairman Greg Medcraft last year said some banks had been using cost-of-living indexes that were “completely inappropriate”
“So if they’re living somewhere like Paddington in Sydney, probably using the poverty line as the cost of living for that person is probably inappropriate,” Mr Medcraft said in July.