The challenger bank has announced that it will be making changes to the way it processes and reports loans so that they are determined by purpose rather than security type.
Beginning this week, all new applications received by the bank will be subject to the new rules, which specify that the product and interest rate will be based on the purpose(s) of the loan and will no longer be dependent on the security type or use.
AMP cited changing regulatory and industry attitudes as the reason for the change.
“We are making some changes to our process and how we report loans, which is consistent with actions taken across the mortgage industry to respond to the regulator’s call for better alignment to current loan purpose reporting guidelines,” the report revealed.
AMP stressed that the change will not affect interest rates for new and existing customers, but could affect “customer initiated” loan changes in the future.
It stated that pipeline deals received before 13 November that do not settle by 16 February, and are reworked, will be subject to the new product and pricing rules, based on loan purpose.
This could mean that an application for investment purposes (investment property or vacant land) secured by an owner-occupied property (and on owner-occupied rates) that hasn’t settled by 16 February 2018, and is reworked after that date, will change to investment products and rates. Any Secure Rate Guarantees (rate lock for fixed rates) will be honoured for up to 90 days.
Further, customers that would like to change from P&I to IO repayments (or vice versa) will have to ensure that the “primary purpose” of the loan remains the same.
Only products and interest rates will be determined by the purpose of the loan; mixed securities can still be applied to loans.
In September, Suncorp Bank imposed similar changes, also referring to market conditions and regulatory compliance as the reason behind the move.
“Following recent changes in the market, we have made changes to our systems to differentiate between borrowers repaying interest-only and those repaying P&I,” banking and wealth CEO David Carter said.
“The change is important as it will ensure [that] the bank can maintain its position relative to regulatory requirements.”
Charbel Kadib is a journalist on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel held roles with public relations agency Fifty Acres, and the Department of Communications and the Arts.
Charbel graduated from the University of Notre Dame Australia with a Bachelor of Arts (Politics & Journalism).
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