Lending policies tighten as big banks reassert control
Small home lenders are continuing to harden lending policies as the macro-economic fallout from the COVID-19 crisis induces wholesale funders and mortgage insurers to reassess underwriting criteria.
Restrictions on lending to applicants employed in hard-hit industries and the tightening of loan to value ratios for borrowers with low upfront deposits are common themes of the revised measures.
An immediate effect of more restrictive loan to value ratios will be that first home buyers will be forced to defer property purchases until the interim measures are withdrawn.
Adelaide Bank, a leading provider of wholesale funding to distributors of mortgages and bridging loans, is demanding more information from brokers about the income status of self-employed applicants.
Mortgage managers tied to Adelaide Bank notified brokers on Tuesday that they would need to identify applicants who had applied for government assistance or a hardship package from their bank.
Brokers would also have to establish whether small business owners were operating in struggling industries such as tourism or hospitality.
If applicants confirm they are exposed to either circumstance the broker is required to submit the three most recent quarterly BAS statements and three months of bank statements before the loan application will be considered.
Auswide Bank, which late last month announced a swathe of new lending measures, has extended restrictions to include a maximum LVR of 80 per cent on all investment loans.
The bank has also ditched its 95 per cent LVR plus LMI uncapped lending policy for first home buyers.
Since Tuesday, first home buyers are limited to a 95 per cent LVR that is inclusive of lenders' mortgage insurance.
ING is asking brokers to stump up additional evidence from applicants about the status of rental income given the uncertainty surrounding the ability of many tenants being able to meet payments.
The bank also told brokers that the discount on bonuses, commissions and overtime income will be recognised at 50 per cent for serviceability testing purposes.
Previously, such income sources were recognised at 80 per cent of their value.
The intensifying economic crisis comes at an awkward time for small banks and non-bank lenders, with the latest market intelligence for home loan activity in March showing a big swing back to the major banks.
Data published yesterday by AFG shows that the majors accounted for three in every five home loans in March - the cartel's most dominant month since 2018.
ING was a big loser after its market share declined to 2.48 per cent from 3.45 per cent.
AFG chief executive David Bailey said generous cash-back offers to new borrowers enabled Westpac and ANZ to make the biggest market share gains in the March quarter.
The AFG data is based exclusively on loan activity recorded within AFG's broker network.
Bailey said that March was a record month for loan activity across the network, with a record 11,196 loans originated that were worth more than A$6.1 billion.