Non-bank lender Homeloans has announced a series of changes including increased broker commissions and tighter credit assessment criteria.
From 31 July, all settlements for the lender’s FlexiChoice products (both prime and specialist) will pay an upfront commission of 0.65% (plus GST) and a trail commission of 0.15% (plus GST).
“Commission was previously 0.60% upfront and 0.10% trail on FlexiChoice Prime, and 0.60% upfront and 0.15% trail on FlexiChoice Specialty,” Daniel Carde, Homeloans general manager of third party distribution, told
Australian Broker.
This change will not affect existing Homeloans FlexiChoice product settled loans which will continue to receive the currently agreed to trail payments.
“A review of the current commission schedule across our entire product suite was undertaken, with the FlexiChoice range identified as being out of alignment with the market. Following consultation with our business partners it was agreed that the more universal 0.65% upfront and 0.15% trail was more appropriate in the current market,” he said.
The lender has also introduced stricter measures using loan-to-income (LTI) ratios when determining credit decisions for interest-only home loan applications.
Effective from last Saturday (8 July), interest-only applications are now either declined or referred depending on the income structure of clients with an LTI ratio of greater than eight. LTI is calculated as the ratio of the total limit of the loan applied for against the client’s total gross annual income.
“Homeloans has access to multiple funding sources, and the use of the LTI in assisting with credit decisions is now a requirement of one of these funding sources. It should be noted that the use of an LTI will initially be limited to the assessment of loans where the borrower has elected for interest-only repayments, and will only apply to our Ultra Plus product range,” Carde said.
Brokers can complete a manual calculation to determine what the LTI is for each client and are urged not to proceed with the application if the LTI is below the threshold of eight (unless the loan amount or gross annual income changes).
The Homeloans Ultra Plus Serviceability Calculator has been updated to reflect these new criteria.
“We're committed to lending responsibly, and ensuring our customers can meet their home loan repayments today and into the future,” the lender wrote in a note to brokers.
“Regulatory bodies have raised concerns about Australia's household debt-to-income ratio, which has risen significantly over the past decade.
“With this in mind, we're making changes to our home lending credit policy to better assess a customer's ability to service their home loan, and to assist Homeloans’ monitoring of risk settings.”
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