Reports that banks are relaxing lending standards are entirely false, says one Sydney broker, and if anything lenders standards are tightening.
Graeme Salt, director of Origin Finance, says while it may be true that the average LVR is higher than it has been historically, that does not mean banks are “dropping the ball”.
“It could just mean that the consumer appetite for risk is increasing,’ Salt told Australian Broker Online. “There is a lot of talk about the ‘fear of missing out’ in the property market, and it’s likely that’s driving people to take on more debt than they would have previously been prepared to do.”
There has been ample evidence in the marketplace of banks tightening lending policies, says Salt, such as the recent changes at
Westpac.
“Up to about a month ago, the assessment buffer for 3-year fixed deals was less stringent than for variable. Now they are same,” he says.
ANZ, Advantedge, Assetline and
CBA have also tightened up standards of late, as Salt outlined in a recent post to Accredited Broker:
EXHIBIT A
In a briefing to the media on ANZ's results, CEO Mike Smith indicated that the bank had tightened its home lending criteria. Normally, he said, lenders liked “to ensure that borrowers have the ability to service loan obligations even if interest rates were to increase by, say, 2.5 per cent. Generally, that stress test has been to a tolerance of 1.5 per cent, and I just think it makes sense to increase it a little bit.”
EXHIBIT B
Earlier this month wholesale funder, Advantedge (owned by
NAB), also increased its stress test tolerance from 1.5 per cent to 2 per cent.
Exhibit C
Conscious of banks tightening Loan Value Ratios, Assetline has launched a personal asset lending. It allows investors to unlock the value of alternative assets that conventional banks won’t touch, such as fine art collections, boats or classic cars.
Exhibit D
In April, CBA tightened its lending policies for investment properties. Where, once, investors could borrow 95 per cent of the value of a property PLUS Lenders Mortgage Insurance, now the maximum that CBA will lend is 95 per cent INCLUDING Lenders Mortgage Insurance.
Rumours of loosening standards have been circulating since NAB CEO Cameron Clyne claimed that at least one ‘unnamed’ competitor was weakening its credit standards after the major lender’s market-leading business bank lost market share.
APRA and the RBA have both issued warnings to banks, telling them not to take extra risk in a low interest rate environment where demand for business loans remains subdued.
