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Property investors 'shackled' by new credit policy

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James Mitchell 7 minute read

A regional broker has slammed a non-major bank’s decision to change its policy “overnight”.

The credit changes shackled his client leaving them unable to grow their portfolio unless he took them to another lender and swallowed the clawback.

Queensland broker Richard West of Top Ten Home Loans told The Adviser that one particular non-major bank changed its lending policy towards investors, which in this case meant that if more than 50 per cent of the servicing was supported by investment rental income then this income source was capped at 50 per cent, down from 80 per cent.

“I had a client who was looking to refinance five properties. This deal settled in February. It was quite a complex deal because they were getting significant investment property rental income. After a lot of organising I placed them with a non-major bank. I gave the bank five deals worth approximately $2.3 million,” Mr West explained.


“That same customer came back to me in August wanting to purchase another investment property, pushing their portfolio to six. I approached the bank, as they understood them as a client and understood the exceptional returns they were getting on their investment rentals.

“The bank said they would provisionally do the deal. We had the valuation done and the loan docs were signed ready to submit but the bank changed their policy overnight, from allowing 80 per cent of investment rental return to 50 per cent.”

As a result of the policy change, Mr West said the deal fell through.

“There was absolutely no way that I could go with the bank. That meant the customer was completely shackled. They couldn’t move, they couldn’t expand, and they couldn’t grow if they stayed with the bank,” he said.

Rather than refinancing four deals with the bank, Mr West refinanced one, in order to generate additional equity from one property to be used for the client’s new purchase.


“I took one of the five properties away from the bank to another lender that would allow 80 per cent of that investment rental return,” he said. “I got a clawback on that deal.”

Mr West said he put the client with a different lender for their new loan. Four of those original five still stayed with the bank.

“We run around like crazy trying to get these deals done,” he said. “I left four deals with the bank and took one away, simply because my customer could not move if I hadn’t. But you get penalised for it with a clawback. It’s a sickness in the business.”

The Queensland broker said that while there are legitimate reasons for clawbacks, such as preventing unnecessary loan churning, he believes it is “very unfair” to have commission taken away because a bank changes its credit policy.

“What are you supposed to do when a customer is shackled and you have no other choice than to take them to another lender because of the restrictive policy changes that have been imposed on your client without warning? It’s just crazy.”

Mr West said he was clawed back 75 per cent of the commission he received from the deal, as the loan had been with the bank for six months.

He said brokers are being unfairly penalised by changes in bank policy.

“In this bank’s case, regulatory pressures drove them to change credit policy – that’s not my client’s fault, but they are the ones who get shackled and I am the one who gets the clawback,” Mr West said.

He added that the client has a portfolio of holiday rentals with significant rental yields which had previously been acceptable to the bank.

[Related: Commission clawbacks to continue, says MFAA]


Property investors 'shackled' by new credit policy
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James Mitchell

James Mitchell

James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.

He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.

James holds a BA (Hons) in English Literature and an MA in Journalism.



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