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Lenders sharpen focus on serviceability

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Reporter 3 minute read

A number of credit providers have revised their lending policies in response to growing economic uncertainty fuelled by the ongoing coronavirus crisis.

La Trobe Financial and ME Bank are the latest lenders to tighten their credit assessment processes to reduce emerging serviceability risks associated with the economic fallout from the coronavirus (COVID-19) outbreak.

La Trobe Financial urged its broker partners to ramp up scrutiny of loan applications from borrowers that are most at risk of encountering serviceability pressures as a result of the current crisis.

The non-bank made particular reference to applicants employed in the tourism, hospitality, entertainment/recreation, personal transport, personal services and sporting industries.

“To date, we have made no formal changes to our credit policy and will continue to consider all applications on their merits,” La Trobe told brokers.


“However, as you can appreciate, in order to make appropriate credit decisions that keep the applicant’s best interests at the forefront, we must give due regard to each applicant’s present and foreseeable situation.

“As applicants’ situations are currently changing significantly on a daily basis, regrettably, and sadly for some, this can mean they are no longer in a position to move forward with their pending plans.”

La Trobe has asked brokers to examine whether a borrower’s income position has been or could be affected by the ongoing crisis, and whether the applicant has a plan to continue to meet loan repayments in the event of hardship.

The lender noted that acceptable methods of demonstrating preparedness for hardship may include plans to convert to interest-only, draw from cash holdings, reduce short-term living expenses, release equity/superannuation, or draw on COVID-19 support payments.


The member-owned lender has also revised its risk appetite, changing its serviceability criteria to reflect an applicant’s field of employment.

For applications lodged from Tuesday, 31 March, ME’s “time in job policy”, which only requires loan applicants to demonstrate three to six months of employment, will only apply to:

  • nurses and medical/healthcare professionals,
  • teachers
  • IT consultants, and
  • ambulance officers, fire fighters and police officers

As a result, ME will require borrowers working in any other profession to demonstrate at least six months of employment or 12 months of continuous casual employment in the same field.

“Changes to ME’s home loan policies are not taken lightly and reflect the need to adapt to a changing market environment and continue to meet our obligation to responsible lending laws when assessing borrowers’ applications,” the bank told brokers.

La Trobe Financial and ME join the likes of Bluestone, Latitude and Pepper Money in revising their risks appetites in response to recent changes in market conditions.

[Related: How COVID-19 is like the space race]

Lenders sharpen focus on serviceability
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