Westpac is tightening borrowing capacity for self-employed customers and people living in areas that are dependent on tourism, a move aimed at reducing risks sparked by the coronavirus pandemic.
The country’s second-biggest bank on Monday said self-employed borrowers taking out new loans would be allowed a maximum loan-to-valuation (LVR) ratio of 80 per cent, or 85 per cent for some medical workers including doctors, dentists, vets, pharmacists and optometrists.
Previously the bank had allowed owner-occupiers who are self-employed to borrow up to 95 per cent of a property’s value, or 90 per cent for property investors.
The banking giant will also introduce an LVR cap of 70 per cent for new loans in postcodes in tourism-heavy areas, mainly in Queensland. “With recent changes to Australia’s economic outlook due to COVID-19, we are making some temporary adjustments to our home lending criteria,” a bank spokeswoman said.
“These updates will help reduce risk for home loan applicants in some affected industries and areas, through measures such as lowering the maximum loan to value ratio.”
The bank, which in its recent profit results made provisions for bad loans based on a 15 per cent fall in house prices, said the changes would be temporary. The effect of the changes will be to require borrowers to stump up a bigger deposit to borrow the same amount, although in the current conditions home buyers may be less keen to take on the maximum amount offered by banks.
In a sign of tighter mortgage credit from smaller banks, Bank of Queensland also said it would require more detailed information about home loan applicants’ income from bonuses, commissions or investments when assessing loans. A note to brokers from BOQ said the changes would be temporary and were a response to the uncertainty created by the pandemic.
ME Bank also told mortgage brokers it would temporarily introduce changes that result in the lender assuming certain types of income, including bonuses, commissions and penalty payments, are treated more conservatively in applications for credit.
This story originally appeared in the Sydney Morning Herald. Read the original story here.
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