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Bank excludes JobKeeper payments from serviceability test

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Reporter 5 minute read

A lender has announced a number of changes to its credit policy, including increases to non-base income haircuts and the exclusion of JobKeeper payments from serviceability tests.

Citi has lowered its risk appetite for new lending, making a series of changes to its serviceability policy, effective for applications submitted from 1 July.

The changes include the exclusion of JobKeeper wage subsidies from serviceability tests, the rejection of applications “reliant on any foreign currency income are”, and reductions to the level of acceptable non-base income.   

All non-base and casual income will now be discounted by 50 per cent, with regular non-base income (e.g. overtime, commissions) to be assessed at the lower of:

  • annualised current month pay slip,
  • annualised current year to date, or
  • 120 per cent of previous financial year’s total income less current base

Citi has also increased the rental income haircut to 15 per cent of gross rent for residential properties, with rental income also unable to exceed 40 per cent of total gross income.

Moreover, Citi will no longer permit cash-out or refinancing of business loans where the LVR exceeds 60 per cent if servicing is “reliant on business income or where the company is a borrower”.

This comes less than two months after the bank added a new layer of scrutiny to the assessment process.

In May, Citi informed brokers that it would require a credit officer to verify an applicant’s employment status prior to final approval, to ensure that there have been no changes to the borrower’s capacity to service the loan.  

Borrowers are also required to provide confirmation from their employer or a bank statement with a salary credit no older than seven days at the time of final approval.


Several lenders across both the non-bank and ADI space have reduced their risk appetites in recent months in response to the economic fallout from COVID-19.

Analysts, including Moody’s vice president and senior credit officer Alena Chen, continue to forecast a sharp rise in credit losses over the coming months, particularly once mortgage deferral period expire in September.  

However, some credit providers, including non-bank lender Bluestone, have rolled back some of their restrictions in recent weeks.

After hiking interest rates, withdrawing its line of credit product and reducing cash-out limits in March, Bluestone revealed last week that it would lift such measures and reduce rates by between 10-110 bps 

This came amid renewed optimism from the Reserve Bank of Australia (RBA), which stated that an economic recovery may be nearer than initially anticipated amid the easing of lockdown restrictions.

“It was possible that the downturn would be shallower than earlier expected,” the RBA noted in minutes from its monetary policy board meeting in June.

“The rate of new infections had declined significantly, and some restrictions had been eased earlier than had previously been thought likely.”

However, the RBA warned that the outlook remained “highly uncertain”, with the pandemic likely to have “long-lasting effects on the economy”.

[Related: Bank automates pre-approval process]

Bank excludes JobKeeper payments from serviceability test
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