Bank of Queensland has introduced restrictions on home lending following the completion of an internal review of home loan risk assessment and the release in late July of the federal government’s bleak employment forecasts.
The bank notified brokers on Monday that it would no longer accept any mortgage applications from self-employed workers and business owners which resulted in their personal debt to income ratios exceeding a multiple of six.
BOQ will also stop lending to pay-as-you-go wage earners requesting funding that exceeds six times their annual income if they require lending to settle more than 80 per cent of a property purchase.
However, the bank has decided to set the debt to income ceiling at a multiple of eight for PAYG income earners able to stump up a deposit of more than 20 per cent on a property purchase.
BOQ stressed in its memo that the new restrictions were “temporary” measures, but did not give any guidance on how long they would remain in place.
“Please note, this position reflects a temporary adjustment the bank’s risk appetite; there will be no change to BOQ’s existing credit policy,” the bank told brokers.
The decision to tighten the debt to income requirements comes at a critical moment for BOQ, which began to regrow mortgage volumes in May after two years of contraction.
APRA data shows that the bank suffered a 6 per cent decline in the size of its home loan book in the 24 months to the end of June, but that trend appeared to reverse in May when mortgage activity expanded.
In an effort to maintain momentum in the mortgage business the bank has softened the eligibility requirements for upfront incentives to new borrowers.
From this week a A$2500 cashback will be available to borrowers with loan to value ratios of up to 80 per cent.
While the cashback offer was launched in June it previously applied only to new mortgages and refinancings for LVRs of up to 70 per cent.