If you’re looking to access more finance this financial year, you should be aware of some key red flags for lenders when they assess your suitability for a loan.
Events of the last couple of years, including the royal commission and the banking regulator’s (now lifted) cap on lenders’ interest-only loans, have prompted Australian banks to tighten their lending principles and access to finance.
Conditions have eased in 2019. The regulator has lifted its cap on interest-only loans and has eased its guidance on loan serviceability, which has prompted a spate of lenders to loosen the assessment terms for new applicants.
However, something that hasn’t changed is the “forensic” approach lenders are taking to assessing their risk, according to Steve Waters, buyers agent at Right Property Group.
Mr Waters’ opinion is informed by his work with hundreds of property investors, many of which have had their loans questioned over relatively mundane spending patterns.
“I had one client who had $40 a week at a local club questioned,” Mr Waters told Smart Property Investment.
“It was a lunch with his mum… but the lender was considering the potential for gambling, alcohol, the works,” he said.
Mr Waters is on board with a robust assessment approach from the lenders, who are now being forced to abide by responsible lending principles.
“It’s a good thing, in the sense that people who should not have access to finance, or are not ready for access to finance, have less chance of getting it,” he said.
“At the end of the day, it makes for a more robust banking system and economy,” he said.
With those factors in mind, Mr Waters is not as bullish as some property commentators about the impact of APRA easing its serviceability guidelines for mortgages.
“The handbrake is off… but the fundamentals of what drives the market are still the same,” Mr Waters said. “Infrastructure, supply, demand.”