High risk home loans targeted by APRA
The Australian Prudential Regulatory Authority has released a proposal that will require banks to differentiate risk weightings for residential mortgages.
It could potentially increase the cost of writing higher-risk loans.
The proposal seeks changes to the risk weightings banks should apply to owner-occupier, investor, interest-only and non-standard loans.
The paper noted APRA's view that there are "potential systemic vulnerabilities" to the financial system created from high levels of residential mortgages lending for investment purposes.
The Australian Broker news website reported ANZ and Westpac Group had introduced confidential changes to their assessment and approval of borrowers.
ANZ was adjusting the discretion available for its frontline mortgage assessors.
A spokesman for ANZ said the bank recently added "a higher level of approval for some discretions" used in its home loan policy for assessing serviceability.
Mortgage brokers claim banks seem to be showing less flexibility in interpreting guidelines on such matters as irregular income when assessing loan applications, BrokerNews advised after a report in the AFR.
The report also said that Westpac recently introduced strict tests of residential property borrowers' current and future capacities to repay their loans.
The change is said to be intended to identify scenarios that might affect borrowers' capacity to pay back their loans. These include having dependents with special needs that might require borrowers to spend on long-term care and treatment.
When asked for comment, a Westpac spokesperson told Australian Broker that the AFR report was based on a note the bank sent to brokers on Monday (12 February).
Earlier this month, Westpac amended its borrowing terms, including allowing the use of desktop valuations only for a maximum LVR of 90%.
A Westpac spokesperson told Australian Broker that the bank has also updated its household expenditure measure in line with the benchmark published by the Melbourne Institute for Social and Economic Research.
This followed Westpac's announcement in December that it would require home loan borrowers to disclose what they owe on short-term buy-now, pay-later loans on digital credit platforms like AfterPay and ZipPay.
