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Bank ceases lending for off-the-plan purchases

by Reporter10 minute read
Teachers Mutual Bank

A non-major lender has announced that it will no longer issue credit for off-the-plan property purchases and has tightened its serviceability assessment policy as part of its response to credit quality concerns arising from the COVID-19 crisis.

Teachers Mutual Bank Ltd (TMBL) has announced several changes to its serviceability assessment policy, lowering its threshold for secondary income.

The changes include:

  • reducing the threshold for commissions and bonuses income from an average of 80 per cent over two years to an average of 50 per cent,
  • reducing the threshold for acceptable regular overtime income (excludes essential services) from 80 per cent to 70 per cent,
  • reducing the threshold for residential rental income from 70 per cent to 60 per cent,
  • reducing the threshold for commercial rental income from 60 per cent to 50 per cent, and
  • reducing the threshold for investment income (interest and dividends) from an average of 80 per cent over the past two years to 50 per cent.

TMBL also announced that it has ceased lending for off-the-plan purchases.


The revisions are effective for all new applications from 1 May, across TMBL’s brands, which also include Firefighters Mutual Bank, Health Professionals Bank and UniBank.  

Mark Middleton, TMBL’s head of third-party distribution, told The Adviser that the changes were made to preserve the group’s credit quality in response to growing risks emerging from the COVID-19 crisis.

“These changes have been made to promote the sustainability of our book throughout this crisis,” he said.

“All of our four divisions have a solid volume of loans coming in at present, and we want to continue to encourage loan applications with strong credit quality.

“As always, we will continue to monitor the situation and consider all environmental factors when reviewing our policy.”

TMBL joins a number of other lenders in tightening its serviceability standards for new lending amid forecasts of a spike in defaults.

Other stakeholders in the lending industry have also adjusted their risk appetites, with mortgage insurer QBE Australia imposing an “embargo” on the provision of lender’s mortgage insurance to borrowers employed in industries hardest hit by the outbreak. 

Deposit bond provider Deposit Power has also revised its underwriting policy for short-term deposit guarantees, doubling the equity requirement for home equity products from one to two times the deposit amount.  

[Related: Westpac tightens screws on LMI, income verification]

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