The non-major has announced a number of changes to its credit policy, which includes the exclusion of casual and contractor income for serviceability assessments.
ING has become the latest lender to tighten its risk appetite in response to economic uncertainty caused by the coronavirus pandemic.
The changes, which are effective for new applications submitted on or after 15 April, include serviceability restrictions on self-employed borrowers and applicants working on a casual or contractual basis.
For self-employed borrowers:
- Income from applicants working in industries most impact by the outbreak – retail, tourism hospitality, aviation – will not be included in serviceability tests.
- Cash out will not be available.
- Business activity statements for the period ending 31 March 2020 will be required to “demonstrate alignment of current revenue to the most recent financial years”.
For casual and contractor applicants:
- Owner-occupier applications that involve only casual or contractor income will not be considered but may be considered as secondary income if the application also involves a salaried employee.
- Casual or contractor income will not be assessed for investor applications.
Moreover, ING has announced that bonus income, commissions and overtime income will be assessed at 50 per cent, down from 80 per cent. Borrowers in essential services industries will be excused from this revision.
The non-major also introduced tighter restrictions on rental income verification, with applicants now required to provide evidence of rental payment within the previous 30 days.
According to ING, its policy changes are aimed at ensuring it continues to lend responsibly.
“We believe these adjustments are appropriate, given the current circumstances and acknowledge the resultant disruption to the incomes of so many Australians,” ING told brokers.
“These measures have been taken to ensure ING doesn’t place borrowers into positions likely to result in loan default due to circumstances beyond their control.”
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.
Deposit Power commented: “Similar to how lenders adjust borrowers qualifying criteria from time to time, so too does Deposit Power.
“Our equity requirement has increased for the home equity qualifying criteria, while the funds to complete method of needing a full loan approval remains unchanged.”
[Related: Gateway tightens lending conditions]