Major bank tightens net on high LTI borrowers

The lender is now declining applications for interest-only loans for new customers with high loan-to-income ratios

Major bank tightens net on high LTI borrowers



National Australia Bank (NAB) has introduced tougher serviceability assessments for interest-only loans in an effort the bank says will strengthen its lending policies.

As of 8 July, the bank has brought in stricter measures and started declining interest-only loans for customers with high loan-to-income (LTI) ratios, which are measured by dividing the total loan amount by the gross annual income.

NAB already performs an LTI calculation on all loan applications but has extended the use of this measure to determine the credit decision outcome for all interest-only home loan applications.

“We regularly review and strengthen our policies so we continue to lend responsibly. This is in keeping with our regulatory obligations, and because we want to support our customers to achieve their current and future home ownership goals,” NAB general manager for home lending, Meg Bonighton, told Australian Broker.

“We’re conscious of concerns raised by regulatory bodies about Australia’s household debt-to-income ratio, which has risen significantly over the past decade. It is with this in mind that we are extending the use of this measure, which will be one of a number of assessments we do in order to ensure the customer is able to manage the new lending they’re seeking.”

The bank is also considering how to use the LTI measure more extensively in the future.

NAB has made a range of changes in recent months, including in relation to interest-only lending, which would ensure the bank can comply with regulatory requirements while supporting its customers, Bonighton said.

“With this new measure, we will strengthen our ability to ensure we’re providing our customers with the right home loan for their situation, and that they can meet their home loan repayments today and into the future.”

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