Property buyers could find that qualifying for a mortgage is harder this week
Property buyers could find that qualifying for a mortgage is harder this week as major lenders tighten the screws in response to concerns about the impact of COVID-19 lockdowns.
Commonwealth Bank, the nation’s largest lender, said it would announce “temporary changes to policies as a result of the current coronavirus situation” that involve heightened scrutiny of any loss or reduction in mortgage applicants’ income, according to a report by The Australian Financial Review.
Other lenders, including non-bank Resimac, are asking New South Wales borrowers mandatory questions about how the pandemic is affecting their income.
Other lenders will likely follow with their own stricter criteria as concerns rise about the uncertainty caused by the lockdowns – and amid increased pressure from regulators to lend responsibly, AFR reported.
The heightened scrutiny comes even as record-low interest rates and booming demand are expected to boost Sydney property prices by more than 21% this year. Melbourne prices are predicted to rise by about 18%, and Hobart prices are expected to see a 23% hike, according to an analysis by National Australia Bank.
Resimac Group chief executive Scott McWilliam told AFR that the company is heightening scrutiny to ensure it is not relying on documentation that may not reflect the borrower’s current situation.
“This means a heightened level of due diligence on income-related supporting documents,” McWilliam said. He said that the non-bank has not made any changes to products or policies about such things as loan-to-valuation ratios.
CBA, which previously said it would use only the latest income documents for loan applications, is also expected to tighten standards. CBA also said it would not accept JobKeeper payments as qualifying income for a mortgage application.
“Lenders are already asking additional questions about how borrowers are likely to be affected – especially those from Sydney,” Anita Marshall, managing director of mortgage broker Advanced Finance Solutions, told AFR.
Matt Florance of estate agency Upside Realty also told AFR that lenders were increasing their scrutiny.
Resimac is telling brokers to ask NSW loan applicants whether they have been affected by the lockdown and about its impact on their income. Resimac is also telling the brokers to get borrowers to provide evidence of that impact, such as a pay slip for their most recent pay period, AFR reported.
“If there is no impact, an outline of how the applicant has not been impacted still needs to be included,” Resimac said in a memo to brokers.