Although the big banks continue to tighten home lending criteria and incentivize customers away from interest-only products, it doesn’t mean the mortgage market is going to lose all momentum.
The Australian Prudential Regulation Authority – or APRA – have introduced measures that make it tougher to get home loans, particularly for investors. The banks all reacted to the tighter regulation by increasing rates on interest-only and investor loans and lifting the deposit requirements for borrowers. However, it hasn’t stopped there with the big banks continuing to announce changes.
Westpac announced just last week that it’s getting rid of some mortgage products completely, including a number of low documentation home loans. The bank previously announced it will withdraw equity-release products such as Seniors Access, which is a line of credit secured against a borrowers' property targeted to older home owners.
This month, Commonwealth Bank also introduced a crackdown on issuing credit cards to its property borrowers. Under these changes, credit loan applications will be processed independently based on details provided in the home loan application. Joint applicants will be assessed on their individual circumstances and the credit card application will be processed after the home loan application.
And whilst the banks all have an obligation to commit to responsible lending practices, they don’t want to stop home lending altogether. Rather, it’s finding a balance between lending money and adhering to the strict criteria from APRA on the speed and size of lending. The mortgage market is still a very active place, with plenty of opportunity for borrowers - we're simply seeing a renewed focus on delivering lower risk loan products.