A non-bank lender has joined a handful of Australian banks and mutuals in changing its credit policy for apartment lending.
Firstmac recently made changes to its high density policy. A spokeperson for the non-bank lender told The Adviser that any loan with a security located in a unit development with more than six floors was considered high density.
“Loans up to 70 per cent LVR can be considered under Firstmac’s Non-LMI policy. Rental income from the security cannot be considered in servicing,” they said.
“Loans over 70 per cent LVR and less than 80 per cent LVR will be considered subject to LMI approval.
Firstmac confirmed that non-resident lending will not be considered under the high density policy.
Earlier this month, ING Direct told brokers that it had changed its underwriting guidelines relating to apartments and unit dwellings with an internal floor space of less than 60 square metres.
Where a proposed security property has an internal floor space of less than 60 square metres (that is, excluding balconies and car spaces) and is less than five years old, ING Direct will limit the maximum LVR on the loan to 70 per cent.
Where a proposed security property has an internal floor space of greater than 50 square metres and less than 60 square metres (that is, excluding balconies and car spaces) and is older than five years, ING Direct will limit the maximum LVR on the loan to 80 per cent.
The new underwriting guidelines are effective for all new applications received from 8 July, 2016.
Meanwhile, Citi's head of mortgage distribution, Matt Wood, told The Adviser that the bank has reduced its LVRs on high density units from 80 per cent to 70 per cent.
Mr Wood explained that Citi also has a list of nearly 260 suburbs (80 postcodes) nationally to which its 'high density unit policy' will apply.
“High density is any unit development containing more than 30 units. The bulk of the postcodes are in Melbourne, Sydney, surrounding inner suburbs and up to 15 kilometres from the central business districts," he said.
The lending changes comes as BIS Shrapnel this month forecasted property prices to deteriorate across all capital cities, primarily driven by an oversupply of apartments.
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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