Regulatory limits hitting home buyers hard

Recent forced changes in bank policy and process have tightened the screws for potential mortgage holders

Regulatory limits hitting home buyers hard



Tighter regulatory scrutiny means that broker clients who wish to sell their property or refinance are finding it harder to secure a loan from the banks.

Victoria Senethep, mortgage broker at Queensland based Chase Finance Australia, said that banks are offering clients much lower property valuations than before.

“Because the banks only look at a few inferior or superior properties, this sort of range is really limited and clients aren’t getting what they expected they would get,” she told Australian Broker.

“In general, the banks don’t want to lend as much money because they have their own funding caps from the regulators as well as targets that they need to meet.”

While Chase Finance caters to residential and commercial lending, borrowers are mostly being hit in resi lending, Senethep said, including investors, first home buyers, upgraders, and refinancers.

The major banks are more likely to choose “vanilla applicants” now, she added.

“They’re approving more applicants who are not generally as risky as before. I find that the smaller lenders are a bit more flexible now. They’re more open to looking at applicants with higher LVRs, lower deposits in the LMI space – they’re more likely to take those applicants on.”

This is a stark difference to previous lending standards where the majors would take on everyone, Senethep said.

“Because they have their contribution caps, they’re picking and choosing now.”

This was a consequence of APRA’s regulatory moves as well as the RBA’s decision to hold the cash rate for so long.

“The banks are trying to anticipate any extra costs which may occur. In turn, this is affecting the consumers who have fewer options. They have to go through brokers more now because we know about the different lenders’ policies better.”

With borrowers being knocked back more frequently, consumers could also find their credit rating affected – another reason why brokers were so useful, she added.

In the current environment, brokers who are close with a handful of banks will find it difficult to service clients, Senethep said.

“It’s about looking across the whole panel. Some of the applicants don’t fit the lender’s policies where they might have been able to before. Brokers have to adapt with the times and with the market to provide more than just a financial service.”

Instead, Senethep said she took a more holistic view to prepare clients for the future and develop a long-term relationship.

“I wouldn’t say that it’s more difficult now but if you’re not getting with the times, then it will be tougher. If you’re in a rut, the market will show you that you can’t continue like that anymore.”

Chase Finance was in a good position, she said, with a focus on educating clients and building up trust.

“We’ll call up our clients and send out emails about what’s happening. When clients are informed, they have a lot more trust in what we’re doing. Even after settlement, you still want to keep in touch, make sure the client is ok and see whether they have any questions about the market or their loan.”

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