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While the Australian economy is starting to reopen, many lenders are still imposing tighter conditions for property loans, particularly those in high-density postcodes.
Investors planning to borrow up to their maximum capacity, rely on bonuses or commissions, or purchase property in high-density postcodes have been warned that restrictive lending policies established in response to COVID-19 are unlikely to ease anytime soon.
Pink Finance director Nicole Cannon explained that investors looking to purchase in the next few months will need to do their research, with some banks requiring lower loan-to-value ratios and scrutinising living expenses more heavily than before.
“They certainly haven’t relaxed those policies that they’ve tightened. Some banks were previously including 100 per cent of bonuses and commission [when assessing serviceability], but we’ve seen a real pullback on that. Different banks have also been really restrictive with loan-to-value ratios and certain postcodes also,” she said.
Ms Cannon said lenders are concerned about high-density postcodes where there has been a lot of development.
In some cases, lenders are not approving loans for properties in these sorts areas or will only go up to 80 per cent, she said.
Banks are also scrutinising living expenses, she said, and while living expenses for some have reduced during the pandemic, it’s important that the expenses that are being used to calculate serviceability are true and accurate moving forward.
“Some lenders have also stated that they won’t be taking casual employees anymore. Some lenders are allowing those receiving JobKeeper payments [to borrow] and some are not,” she said.
“I think it’s just a matter of getting extra documentation upfront, so we are requesting a letter of employment from every single customer and every single application. Even if the bank isn’t requiring it, we’ll still request it so we have it on our file, just in case something happens down the track.”
Density refers to the distribution of population in a certain area of land, which is measured by the number of residential units per land area.