NAB introduces restrictions for older home buyers

by Miklos Bolza01 Nov 2016
The National Australia Bank (NAB) has brought in stricter regulations for older property buyers seeking to take out a home loan.
The new guidelines apply to mortgage brokers and other third parties offering white-label loans through NAB’s wholesale funder and distribute Advantedge Financial Services.
“Where a borrower or co-borrower will reach 70 years of age prior to the expiry of the loan term … you must be able to establish how the borrower will be able to meet repayments upon retirement for the remainder of the loan term,” the new policy is reported as saying.
This strengthens the bank’s current regulations which ask brokers to establish how borrowers of 60 years old will meet mortgage payments upon retirement.
A spokesperson from Advantedge told Australian Broker that the lender was committed to responsible lending and having detailed discussions with customers. The overall point of the policy was to initiate conversations with borrowers around proper lending practices.
“Age does not affect a customer’s loan application. Through this policy, we are simply seeking to understand their financial capacity to repay their loan upon possible retirement – for example, they may say they will have paid off their loan, or plan to sell their asset, or they will have adequate funds to continue meeting their repayments,” she said.
However, the Australian Financial Review has reported that certain lawyers and aged groups have said the restrictions might be discriminatory.
“This issue is ability to repay a loan, not age. It should not matter whether someone is 40 years old, or 50 or 70 if they are able to service their borrowings,” Ian Yates, chief executive of Council On The Ageing (COTA), told the AFR.
Alex Grayson, a senior associate at Maurice Blackburn, also spoke to the paper, saying that section 28 of the Age Discrimination Act made it unlawful for a provider of goods and services to discriminate against an individual “on the grounds of the person’s age”.
“Consideration of a loan application should be about an applicant's ability to service a loan and capacity to make their repayments, regardless of their age,” she said.

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  • by Really? 1/11/2016 9:46:17 AM

    Age discrimination isn't talked about; but it is rampant with banks - hiding it behind NCCP.
    Banks love 'responsible lending', as the implementers had only a vague idea of what they meant by it; hence banks can ban any segment of the market, introduce policies they would previously have struggled to justify - regardless of other laws - block anything they want......and pass it all off as their interpretation of responsible lending.

  • by Ozzoid 1/11/2016 10:25:59 AM

    Alternatively, there could be a simple clause added to applications submitted by 'over the hill' persons:

    "Funeral Insurance (provided by this bank) will be required to cover any outstanding balances (in case of future negative vital signs of the applicant)."

    Everybody wins. Sort of.

  • by Marty McDonald 1/11/2016 10:46:24 AM

    They are making the borrower prove they will have the capacity to repay the loan after retirement....big deal. So they should. It doesn't mean an elderly person with means cant get a loan. What I have a problem with is stupid income assessment policies that effect elderly borrowers such as CBA's where they wont take actual / historical dividend or investment income into account instead they take a very low assumed % return based on the shares / investments current value (a meager 2.25% pa of the value). Then they have the gall to shade this income by 20%! Stupid and unrealistic for share and managed fund investments. So a client with $2,000,000 in retirement savings held in shares is assessed as having income from that of only $36,000 pa by CBA. The actual figure with franking credits is more like $150,000 pa. Which of course makes a big difference to borrowing capacity. Devil is in the detail as always.