Major bank tightens lending policies for new homes

by AB12 Aug 2015
Buying a block of land or house off the plan is set to become more difficult as Australia’s biggest bank makes changes to how it will finance people looking to do so.

The Australian Financial Review this week revealed that the Commonwealth Bank provided a confidential presentation to mortgage brokers in which the bank said it will not provide finance to people looking to buy in new developments until all necessary work to make lots ready for development has been completed.

According to the AFR, the confidential presentation told brokers that rather than relying on a development plan to assess whether it would commit to a loan or not, the bank will now wait until an external valuer physically inspects the lot.

“We believe a more accurate measurement in getting a valuation on unregistered land at an appropriate time should instead be based on the valuer having access to the estate and being able to physically identify the allotment,” the bank’s presentation read.

The bank is likely to formally introduce the changes in the coming weeks and in a statement to the AFR defended the move as a means of practicing responsible lending habits.

“In line with our responsible lending commitments, we constantly review and monitor our lending standards to ensure we are maintaining our prudent lending standards and meeting our customers' financial needs,” the statement read.

The move could be controversial one, as it could contribute to the lack of land supply already driving up house prices and locking out first home buyers in Australia’s most heated housing market, Sydney.
 

COMMENTS

  • by Tony Broker. 12/08/2015 9:43:35 AM

    I suggest CBA just shut the doors.

  • by V. 12/08/2015 10:19:41 AM

    Shouldn't blame the bank, it should be the relevant authoritative bodies who approve and give title to the land to improve their turnaround times.

  • by Risky Business 12/08/2015 10:42:11 AM

    There needs to be change to stop developers off the plan contracts requiring UNCONDITIONAL finance approval BEFORE lots are registered or builds are materially completed. Valuations are not standing up because of inflated commissions with Lenders only prepared to honour a FULL approvals for around 90 days many purchasers are at risk with their deposits when valuations come in short.
    Long dated off the plan contracts seem to be at odds with NCCP obligations
    Its not Lenders who need change, its the developers & contract law.