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Further Strictness in Investor Lending Rules by Major Australian Banks

July 8, 2015

Worries arising from the risks of hot property market in Australia is forcing major banks to make their lending rules stricter.

From today onwards, the four big Australian banks named Westpac, ANZ, NAB and Commonwealth Bank have changed their lending policies. The largest lender Westpac limits loans to value ratio to 80%, which was previously 95%, whereas ANZ limits loans to value ratio to 90%, which was previously 97%. Similar strategy was followed by NAB and Commonwealth Bank.

Growth in home prices is very quick, especially in Sydney and if you talk about the percentage increase in growth in the past two years, then it is increased by 40%, which is quite high. New lending dominates the investor lending in the area, and central bank mentioned this as “crazy” in his statement and warns that the growth in investor lending should be limited to only 10 per cent. Banks are following this 10 per cent rules by making their lending rules stricter.

After the yesterday interest rate decision, RBA’s governor Glenn Stevens said, “The bank was working with other regulators to assess and contain risks that could arise in the property market”.

Wayne Byres, chairman of the Australian Prudential Regulation Authority, last month told a senate committee hearing in Canberra that the regulator would be watching carefully for the banks to revise policies to ensure they had ended lending practices that were “less than prudent“.

News Source: www.theaustralian.com.au/business/latest/banks-again-tighten-investor-lending/story-e6frg90f-1227433892722

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