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Further Tightening in Home Loan Rules by Commonwealth Bank Australia

June 23, 2015

There’s a lot of pressure on the Australian lenders to slow down the hot property market. For this, major banks made their lending rules strict. In continuation to this, Commonwealth Bank Australia imposed some more rules to home loan lending to make it strict.

As per the new rules of CBA, the existing debts as well the incomes of the new borrowers will be analysed more precisely from now. In addition, there will be a 20% of servicing loading applicable on all repayments on existing home loans and lines of credit held by customers.

CBA also said that, a tough approach would now be followed while analysing borrower’s income and other factors. It will accept only 80 per cent of income from overtime, bonuses, and investment income when it is assessing home and investment loan applications.

Apart from that, for all new investment loans with a loan-to-valuation ratio above 90%, the bank will not consider the tax breaks borrowers receive from negative gearing when it is deciding whether to approve the loan application.

CBA said, “The maximum loan-to-valuation ratio for all owner-occupied home loan applications would be 95 per cent. The bank’s website says its existing policy is to allow LVRs of up to 97 per cent, including the cost of mortgage insurance”.

In a note to brokers’ bank states, “As the nation’s largest home loan provider we constantly review and monitor our loan portfolio to ensure we are maintaining prudent lending standards and meeting our customers’ financial needs”.

The rules applies are very much similar to the ones as imposed earlier by banks so as to comply with APRA’s cap of 10 per cent a year on investor credit growth.

News Source: http://www.theage.com.au/business/banking-and-finance/cba-tightens-home-loan-rules-20150621-ghtle7.html

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