BOQ pulls out of low doc loans

A spokesperson for the bank said: “Following a recent review of our products, BOQ has decided to no longer offer low doc loan products.

“Customers with existing low doc loans will not be impacted by this change.”

The statement went on to confirm that BOQ “offers borrowers a range of products to suit their individual needs”.

BOQ becomes the second bank this week to announce that it would stop writing the low documentation loans, after the Commonwealth Bank of Australia (CBA) said that it would remove the product (and several others, too).

Many banks have been pulling back from offering these types of loans in the past few years (NAB pulled out of this area in January 2014 while Westpac withdrew its low doc loans in July 2017), citing unpopularity with customers.

ANZ recently told The Adviser that it does still offer low doc loans, but that they are “only available to customers under a strict criteria and make up a very small percentage of [the bank’s] current applications.

“To be considered, self-employed customers need to provide a deposit of at least 40 per cent of the property’s value. They also need to have a registered ABN for at least 12 months and provide their most recent 12 month business activity statements, including acknowledgement of receipt from the Australian Taxation Office,” the spokesperson said.

Indeed, recent stats show that there has been an ongoing drop in the number and value of low doc loans approved by the banks.

According to APRA statistics, the value of low documentation loans held by authorised deposit-taking institutions (ADIs) with greater than $1 billion of term loans has been falling steadily since its peak at the end of the calendar year 2010.

In the quarter ended December 2010, $60.2 billion of total residential term loans to households were low doc (comprising 303,000 loans), while the most recent quarterly statistics show that $20 billion of loans (through 101,000 loans) were low doc (in the quarter ended March 2018).

Of new residential term loans, just $225 million of low doc residential term loans to households were approved, making up just 0.3 of a percentage point of overall lending.

BOQ home loan policy changes

As well as announcing the removal of low doc products, the bank has also made a range of other changes to the bank’s home loan policy. These include:

• Changing the maximum loan-to-value ratio (LVR) for owner-occupier loans from 95 per cent plus LMI to 98 per cent including LMI.
• Requiring that all housing loans with an LVR over 90 per cent have scheduled repayments on principal and interest (P&I) terms.
• Requiring that all housing loans above base LVR 90 per cent be secured by properties situated in BOQ Metro Plus and Genworth Category 1 locations only (excludes Category 2, Category 3 and “all other” locations).
• Setting the maximum LVR for interest-only loans at 90 per cent (inclusive of LMI for investment and 90 per cent exclusive of LMI for owner-occupied loans).
• Introducing a new requirement to capture the borrower’s reasons for interest-only requests.
• Disallowing the acquisition or usage of cryptocurrency as an acceptable purpose for a loan.
• Disallowing the refinance of any payday lender or debt repair agency as an acceptable purpose for a loan.
• Disallowing the payment of any government penalties or fines (including SPER debt) or court orders (including court judgements) as an acceptable purpose for a loan.
• Requiring applicants with self-employed and PAYG income to provide accountant confirmation to confirm self-employed entity trading and tax liabilities status.
• Ruling out any construction of a residential dwelling not onsite (residential property) as an acceptable security on a loan unless the partial construction of the structure is confirmed as being erected onsite and then subsequently funded through progress drawdowns.

BOQ is also adding Chermside (4032) and Hamilton (4007) as “high-density” Brisbane locations due to the increase and pipeline of unit/apartment developments in these postcodes, among other changes.

What do you think of the non-major banks?

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This is your chance to tell us what the non-major banks are doing well and where they should improve their broker proposition, if they are to win more of your business.

The survey will only take around 10–15 minutes to complete.

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[Related: CBA to withdraw from low doc lending]