One in three mortgages being rejected, says BDM

“It’s [credit tightening] affected servicing and how much you can actually lend based on incomes,” Mr Hong said.

“Certain offers that they put into place, higher living expenses, certain buffer rates, have reduced what [clients] can borrow.

“In the last 12 months, I would say one in three deals that come into my hands weren’t able to [get] service[d] and weren’t able to get the funds they were after.

“Two to three years ago, it was maybe one in five or one in six clients.”

The BDM added that borrowers, who have previously obtained unsuitable loans, are now struggling to manage their mortgage repayments.

“Existing clients are coming back because they’re not being able to service the loans that they were initially approved for because of the tightening of the service calculations,” the broker continued.

“Going back two years ago, people were getting million-dollar loans — $1 million to $1.5 million — with just $80,000 incomes or combined incomes of $150,000.

“They were on fixed rates of 3.99 per cent on interest-only loans, which they could afford, but when these fixed rates come off and the interest-only comes off, those clients are going to struggle to make the P&I repayments because they haven’t adapted to a lifestyle of paying principal and interest.”

Mr Hong believes that credit policy changes were “justified”, but he argued that lenders have “gone too far” and should “backtrack”.

“If they were trying to go 100 per cent, they’ve probably gone 150 or 160 per cent and they need to backtrack maybe 30 per cent,” Mr Hong said.