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Citi tightens home lending policy

by Reporter4 minute read

The non-major has made changes to its mortgage lending policy in response to “changing dynamics” in the housing market.

Citibank has announced increases to its rental income discount and changes to its loan-to-value ratio (LVR) requirements for high-density residential dwellings.

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Effective from 10 May, Citi has increased the gross rental income discount for home loan applications from 20 per cent to 25 per cent for residential properties across Australia, excluding Western Australia where the discount will remain at 30 per cent.

For all other ‘non-standard’ properties (e.g. commercial, rural residential, serviced apartments), the discount to the gross rent will remain unchanged at 40 per cent.


According to Citi, the changes have come off the back of “falling rents and an increase in vacancy rates”.

Further, Citi has reduced the maximum LVR for high-density dwellings to 65 per cent, with the exception of dwellings situated in a development with less than 30 units and excluding units older than two years.

Citi added that if the units being used as a security are in a development of less than 30 units and older than two years, current LVR requirement will apply up to 80 per cent.

In a statement to The Adviser, a Citi spokesperson said: “Citi regularly reviews its policies and has made these changes in response to the changing dynamics within the property market.

“The changes were implemented last Friday and will remain in place indefinitely.”

Citi has also updated its serviceability calculator, including new annual living expenses to be used in Citibank’s Capacity Test to reflect:

  • A minimum annual living expense of $18,384 for singles
  • A minimum annual living expense of $26,726 for couples
  • A minimum annual living expense of $6,865 for each dependent

The new minimum monthly rental amount has also been set at $779 per month, per applicant.

Citi is the latest lender to tighten its credit policy after Adelaide Bank announced last week that it would increase its minimum serviceability ratio for loan applications with an LVR over 90 per cent from 1 to 1.25.

Adelaide Bank’s changes are effective for loans submitted from 16 May.

The bank has said that, for any application submitted from 16 May, the minimum serviceability ratio for applications above 90 per cent LVR (inclusive of lenders’ mortgage insurance) will increase to 1.25.

[Related: Non-major updates serviceability requirements]

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