The two largest Australian banks have moved to curb high-risk mortgages as regulators have revealed that they have warned some financial institutions to reduce high-risk loans.
- APRA’s boss revealed that regulators have contacted some banks about a surge in high-risk debt-to-income lending.
- ANZ and NAB recently imposed new, lower caps on such loans
- This move will reduce the maximum amount that some mortgage applicants can borrow.
This week, ANZ told mortgage brokers and their bankers that they will no longer lend to borrowers who borrow more than 7.5 times their annual income from June 6.
This is nine times higher than before.
Earlier this month, NAB lowered its debt-to-income limit (DTI) from nine to eight times its income.
These moves have the effect of reducing the maximum amount that a homebuyer or someone refinancing can borrow from what was previously possible.
“ANZ regularly reviews its lending motivation and policies in response to changes in the economic environment to enable it to continue to prudent lending to its clients,” a spokeswoman for the bank said.
Maile Carnegie, head of retail banking at ANZ, said at the AFR Banking Summit this morning that the change was partly due to concerns from banking regulator APRA over rising levels of loans with a DTI ratio above 6. I said it was a response. I think it’s dangerous.
Ms. Carnegie said few loans were close to the nine-fold limit of ANZ’s previous income, but nearly a quarter of new loans in the second half of last year had a DTI of 6 or higher.
APRA warns some banks to raise standards
At the same banking meeting hours later, APRA Chairman Wayne Byers confirmed that he had contacted some banks with concerns about the level of high DTI loans issued by regulatory agencies.
“We will also carefully monitor the experience of borrowers who have borrowed at multiples of their income, a cohort that has grown significantly over the past year,” he said at the AFR Summit.
“Therefore, we chose to address concerns on a bank-by-bank basis, rather than choosing all forms of macroprudential support.
“We expect these bank lending policy changes, coupled with rising interest rates, to begin to ease high DTI borrowing levels over the next period.”
In a written statement, NAB executive Kirsten Piper said, “Banks are” promised to lend responsibly to enable customers to properly manage repayments both now and in the future. I have. “
Both Westpac and CBA have told ABC News that they have not recently made any changes to their policy on high debt-to-income loans.
Westpac said all loans with a DTI of 7 or higher will be sent for “manual evaluation” by the credit team.
ABC is an experienced banker in this process to review the applicant’s employment history, income, and collateral quality (ie, valuation of assets, especially mortgage assets) before approving or rejecting a loan. I understand that is involved.
Loans with a DTI of 6 or higher and a high loan-to-value ratio are subject to “stricter lending parameters,” according to the CBA.
“There seems to be a pocket of stress”
APRA began increasing mortgage vigilance last October when it announced an increase in the minimum serviceability buffer for mortgages.
In other words, from November The new borrower needed to be tested to see if it could handle interest rates that were at least 3 percent higher than the current interest rates.Increased from the previous 2.5%.
Sally Tindall, Research Director at RateCity, said changes, coupled with rising interest rates, would have a far greater impact on the amount people can borrow.
“The debt-to-income ratio is one small component of the conservative equation, especially rising interest rates are much more likely to affect future people’s mortgage applications,” she told ABC News. Told.
“This is likely to help reverse the upward trend in the debt-to-income ratio without the need for further market-wide regulation.”
Byres said regulators aren’t concerned about the potential for mortgage defaults across the banking sector, but some borrowers, especially recent borrowers, are under severe financial stress. I was worried that it might be possible.
“We are now in a very different environment than what has existed for many of the last decade,” he said.
“Faster inflation and the emergence of interest rates have a significant impact on many mortgage borrowers, which can create stress pockets, especially if interest rates rise rapidly and home prices fall as expected. ..
Negative equity is a situation in which a borrower owes more to a lender than to the value of his or her assets.
Recent borrowers with low deposits are particularly at risk if home prices fall.
Tindall said these risks require future homebuyers to think carefully about how much they are willing to rent.
“Banks approve loans with a debt-to-revenue ratio of 6 or greater, but if the bank passes other serviceability tests, the borrower considers this type of loan to be dangerous by regulatory authorities. You need to know, “she said.
“If you’re thinking of taking out a new loan, don’t rely on the bank for the amount you can borrow. Calculate the monthly repayment amount if interest rates rise by up to 3 percentage points. You’re undertaking About the amount of debt. Real estate prices can go up and down, but it doesn’t magically erase your debt.
“For the next three decades, suffering from excessive debt may be considered worthless.”
Post , Has been updated