Changes to Lending
Changes to Lending
The old saying – times are a changing – couldn’t be more true.
The lending criteria/platform has definitely changed in the last 12 months.
After tightening up its loan book in response to the Australian Prudential Regulation Authority (APRA) driven crackdown last year – a major lender Westpac is set to make life easier for investors.
According to a report in Fairfax media outlets, the big four bank has advised mortgage brokers that its loan to value ratios (LVR) for investment loans will move back from 80% back to 90%.
The changes are not only affecting investors – owner occupied lending has also seen its fair share of moving criteria.
Although interest rates are at an all-time low – serviceability is being tested at normal lending rates – approximately 7.20% as an average. This is a higher percentage loading on servicing than normal. Traditionally it has been on average 2 – 2.25% above the current rates. At the moment it is over 3% loading on the rate. This is not necessarily a bad thing – as we all know that rates will increase eventually and your normal loan is 30 years – so you need to make sure you can afford it in the coming years.
Income assessment has also taken a hit. Regular overtime traditionally has been assessed at 100% of the income – now regular overtime is assessed at 80% of the income.
Foreign income has also dramatically changed – different at each lender – some banks are only accepting certain currencies as well as lowering LVR’S (loan to value ratios).
Living costs – the amount allocated to basic living costs has also gone up. This is derived from ABS (Australian Bureau of Statistics). Some banks are now apportioning the cost of living according to your income/earnings. The more you earn – the more you tend to spend.
So the whole platform has changed. With some a different market – it is well worth getting your pre-approval ready and checked prior to committing yourself.
So talk to us first and we can either reassure you of your next purchase or at least give you some options.