Major bank changes consumer credit policies

Assessing serviceability for short-term ‘buy now, pay later’ commitments

This policy has been updated to include capture of loans used by customers to make a purchase of goods or services. For example, if a customer purchases goods or services with a financier such as AfterPay or ZipPay, they are deemed to have created a liability, which must be captured in the loan application along with the monthly repayment.

Where evidence is held to confirm that the liability will be cleared in full before settlement or drawdown, a $1 repayment can be entered against the liability.

Brokers are being advised that detailed comments will need to be included, with evidence retained with the file documents confirming the amount owing and the required repayments, along with the expected settlement or loan drawdown date.

Casual income for non-mortgage insured loans

The verification and documentation requirements for casually employed applicants have been updated to “simplify and improve customer experience”.

For example, a previous year’s tax return will not be required if using a Group 1A document for a non-mortgage insured loan.

There are no changes to the time in employment requirements around when casual employment is acceptable.

Further details can be found on the relevant bank’s broker portal.

There is no change to the existing requirements for mortgage insured loans.

Medico sector and industry sector policies

The changes to the medico sector involve an increase in the maximum loan amount without LMI.

Lenders Mortgage Insurance will not be needed for loans of up to $5 million and for loans with value ratios of up to 90 per cent, irrespective of the security value.

Previously, the LMI-free maximum loan amount was $4.5 million.

Interest-only loans converting to principal and interest will also be acceptable to a maximum LVR of 90 per cent without mortgage insurance, according to Westpac Group.

The changes are applicable for both owner-occupied and investor loans.

However, the banking group warned that the policy change cannot be applied retrospectively to loans already drawn down.

Existing Medico Sector loans structured as P&I that have drawn down must still adhere to the minimum 12-month restriction period, with standard verification activities also to apply — i.e., switching to interest-only (IO) within the first 12 months from loan drawdown is not permitted. There are no exceptions to this, including by credit.

Westpac Group has also said that Medical has now been removed as an eligible industry for the group, with eligible applicants now being directed to the Medico Sector Policy instead.

Assess calculator

Westpac’s Assess worksheet v4 will continue to display the policy maximum bonus amount of $2,500pm ($30,000 p.a.), but a new feature has been added to the notes section.

The orange box in the notes section will display the total net bonus amount if the verifiable bonus is greater than $30,000 p.a., and a calculated figure will be needed to be supplied in a referral to credit for further consideration.

[Related: Living expenses draw sharper focus]