For anyone wanting to purchase a property while interest rates are low, it may be worth noting that lenders are tightening their lending criteria. Securing housing finance is now a more difficult task than a few months ago.
Paul Heilig, joint head of lending for Centric Lending Services says that the cautious lending in the market is making it harder for people to get finance.
Mortgage brokers are advising that consumers should try to ensure their finances are as organised as possible and avoid any payment arrears on existing loans.
Reducing debt is an effective way to increase your chances of approval and potential borrowers are being wanred that your credit score is important to lenders. Your credit limit can affect your chances, not just the balance owing so take a good look at your existing debt.
No -deposit loans are also becoming less available, with banks and other lenders now requiring at least some deposit and limiting borrowing to 90% of the property value.
Mortgage Choice senior corporate affairs manager Kristy Sheppard says only a couple of lenders now offer 100 per cent loans. And the cut-off point for low-doc loans can be about 60 per cent, she says.
Low-doc loans excuse borrowers from submitting the sort of documentary support that would be required for a standard loan. This has long eased the way for small-business operators and self-employed people - but in recent times such loans have also been offered to borrowers who wouldn't pass muster otherwise. Sheppard says there's also much more insistence that borrowers have genuine savings.
For instance, a spokeswoman for the Commonwealth Bank confirmed the bank requires first-home buyers to have a "deposit" from their own savings of 3 per cent, rather than relying totally on the first-home buyer's grant for their deposit.
In addition, lenders are being more rigorous in checking loan applications.
"A number of lenders are manually checking a higher percentage of the loan applications coming through, rather than running them through the automatic approval criteria," Sheppard says.
They're also adjusting their "serviceability" calculators, setting a higher bar for the amount that must remain in the household kitty after loan repayments and other commitments are taken into account.
In the boom times of recent years some lenders relaxed their debt serviceability criteria to the point that repayments could account for as much as half of a higher-income earner's gross income, according to research by the Australian Prudential Regulation Authority.
This serviceability measure has fallen back to be closer to the old rule of thumb of 30 per cent of gross income.
In another sign of the times, Heilig says many lenders now won't include salary bonuses in their assessment of a borrower's ability to service a loan.
"As a general rule bonuses used to be added on," he says.
"What we're seeing now is a lot of lenders are saying, 'We're not going to account for bonuses because we're not sure they're going to be getting bonuses in this environment.' "
The door shuts on refinancing
Businesswoman Yasmin Dale had a taste of the new attitude among lenders when she inquired about refinancing an existing loan and borrowing further for a second investment property.
Dale made an initial phone inquiry to her lender of nearly five years' standing, ING, only to be told there was no point talking further because she had a black mark on her record and it had to be blemish-free for six months for her to qualify for a loan.
She was shocked to learn that a mortgage payment was one day late last October and this disqualified her.
"I think it was just a hiccup - there may have been lack of funds [when the transaction went through] but it was paid the following day," she says.
The ING representative wasn't interested in her earnings, her assets or the size of her deposit, she says, instead advising her to ring back in April, when six months will have passed since the late payment.
"She wouldn't even allow me to argue the point," says Dale, the managing director of REC Headhunters in Sydney.
Dale then telephoned the Commonwealth Bank and BankWest but at the time of writing, her calls hadn't been returned.
"They aren't as aggressive now as they were - they used to return calls very quickly," she says.
"It's ironic that eight or nine months ago, banks were desperately loaning out money.
"Now it's a totally different story.
"Overall it seems that lenders have gone from almost giving away money in 2008 to really playing hardball."