 Lending business now stricter
Lending criteria of banks are becoming stricter while house prices and interest rates continue to increase. Borrowers are expected to experience more credit investigations from banks before home loans or refinance can be secured. First-home buyers are almost certainly the most hit on this new condition.
Credit unions and building societies will offer lending business as well, but will also be strict with borrowing standards. Borrowers who are considered bigger risk will be given higher interest rate.
According to Fujitsu Australia consulting director Martin North, home loans will constitute 60 to 65 % of a big bank's loan book.
"Our view is that this can't, and probably won't, continue," North says. "With business lending - which tends to be more profitable - coming back, it seems quite likely to us that the banks will be looking to grow that side of their book instead.
North cautions that banks will be scrutinizing harder on income, savings history, loan-to-value ratio, and credit rating.
Market researcher Canstar Cannex says that HomeSide Lending of National Australia Bank is now directly linking the interest rate to the loan-to- value ratio. This suggests that the lower the deposit, the bigger the rate.
For a first home buyer who needs ninety five percent of loan approval, yet if no savings history, it is definitely hard to secure a loan, according to North.
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