ANZ toughens up lending rules for mortgage customers

ONE of the nation’s biggest banks is dramatically changing its rules on mortgages that will impact thousands of customers and investors.

EXCLUSIVE

ONE of the nation’s biggest banks has revealed they are cracking down on mortgage customers who are failing to pay down their principal.

ANZ has revealed it is implementing a raft of new changes that will make it tougher for customers on interest-only deals and force many to have to switch to principal and interest loan repayments.

ANZ is cracking down on interest-only loans which will impact investors.

In a notice issued by the bank to brokers this week it outlined multiple changes to their lending rules on how these assess interest-only loan renewals:

— All interest-only renewals be processed by requiring full income verification and must meet a serviceability test over the new principal and interest loan term.

— If serviceability is evident the loan may enter a new contract for an interest-only period.

— If serviceability is not evident then the loan must remain or revert to principal and interest.

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Mortgage bidding marketplace LoanDolphin’s chief executive officer Ranin Mendis said these changes could have a significant impact on ANZ borrowers.

LoanDolphin’s chief executive officer Ranin Mendis said the latest ANZ changes will impact many ANZ customers who have investor loans.

“Clearly, this will have a ripple effect in many forms starting with existing ANZ clients having to reconsider their strategies or look elsewhere to refinance their mortgage,’’ he said.

“Property investors will definitely start to feel the heat.

“Also, this move will be a warning shot for future property investors who are planning to get into a property in this current lending environment.”

The changes kick in from Monday, March 5.

On a $300,000 30-year ANZ investment interest-only standard variable rate of 5.46 per cent monthly repayments are $1365.

If a customer changes to principal and interest repayments will increase by $389 per month to $1754.

Traditionally interest-only loans are far more common among investors.

The banking regulator, the Australian Prudential and Regulation Authority, has recently cracked down on this type of lending.

Many property investors will be impacted by the changes ANZ has made to interest-only lending.

Last year they forced the banking sector to limit interest-only lending to 30 per cent of all new loans — down from what was 45 per cent at the time.

Interest-only loans usually last five years before they expire.

An ANZ spokeswoman said in a issued statement the bank regularly reviews their lending practices.

“We want our customers to pay down their loans as fast as they reasonably can,’’ he said.

“While interest-only loans are suitable for some customers, we want to properly discuss the circumstances with them to make sure they have the right loan, including when an interest-only term expires.”

Just this week ANZ revealed it was hunting a bigger slice of the mortgage pie confirming that its lending book was growing at 1.2 times the speed of rest of the banking sector in the December quarter.

And their focus remains firmly on owner occupiers while also staying below the limits of riskier lending such as interest-only loans.

Borrowers should be seeking mortgages rates below the four per cent mark.

Mr Mendis said borrowers should be hunting for more competitive offers in the market, particularly owner occupiers who can find fixed and variable rate deals well below four per cent.

In the latest changes ANZ also revealed from next week customers on interest-only deals will receive a letter six months prior to the interest-only period expiry to explain their options.

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