Commbank toughens up on home loan lending

EXCLUSIVE: Dramatic changes coming to Commonwealth Bank home loans will force customers to save much larger deposits, depending on where they are looking to buy.

THE nation’s largest lender is making it harder for customers to get the green light and successfully be approved for a home loan under a raft of new changes.

The Commonwealth Bank of Australia revealed on Tuesday it will restrict lending in certain postcodes and require more borrowers to take out the very-expensive lenders’ mortgage insurance (LMI).

The changes include reducing the maximum loan-to-value ratio without LMI from 80 per cent to 70 per cent in certain postcodes and regions, resulting in borrowers having to have a 30 per cent deposit.

Commbank is rolling out a range of changing which will make it tougher for customers to successfully get a loan

CBA remain tight-lipped on which postcodes and regions would be directly impact by the raft of measures but this specific change is not applicable in Sydney and Melbourne.

LMI is an expensive insurance the customer pays which protects the lender not the borrower and costs thousands of dollars.

As an example on a $300,000 loan where these measures do apply, it means borrowers would have to stump up $90,000 deposit (30 per cent.)

The changes will impact all types of properties including homes and apartments and also both owner occupiers and investors.

In a note issued to brokers, CBA stated the changes which start from Monday also include :

— Reducing the amount of rental income and negative gearing eligible for servicing which will impact investors.

— Change eligibility for Lenders Mortgage Insurance waivers and LMI offers for customers in some postcodes.

Home Loan Experts’ managing director Otto Dargan said these changes were significant and would impact many borrowers.

“Lenders keep an eye on the economy and their exposure to different property markets and adjust their lending policies to manage their risks,’’ he said.

Home loan lending with the nation’s largest bank is about to get harder.

“We strongly recommend that home buyers don’t commit to buy a property until they have an unconditional approval from a bank.”

Unconditional approval is when your loan application has been fully approved and is not subject to any terms or conditions.

A CBA spokesman said the changes were a result of responsible lending restrictions put on lenders by regulators to cool the red-hot lending market.

“We’re making changes to some of our lending policies in certain regions to ensure we continue to lend appropriately and responsibly to customers looking to buy a home,’’ the spokesman said.

“We continue to lend in every region and postcode across the country.”

CBA said will roll out a new Postcode Lookup tool next week allowing allow the bank and brokers to determine whether a borrower can successfully borrow in a particularly region or postcode in a bid to reduce customers wasting time applying where they are likely to get knocked back on a loan.

@sophieelsworth

Originally published as Commbank toughens up on home loan lending