Brokers have revealed the types of loans they are increasingly opting not to write, as more step away from highly leveraged, time-consuming deals.
Brokers have detailed the types of loans they are increasingly choosing not to write, underscoring a growing willingness within the industry to walk away from deals that clash with risk appetite, regulatory expectations, or their own professional judgement.
For James Algar, franchise owner at Mortgage Choice Dee Why, the clearest example of this shift was a recent client determined to build a large portfolio using multiple trusts.
“A client approached me seeking to purchase multiple properties within trust structures, primarily aiming to maximise the number of properties he could buy,” Algar said.
“While I am very familiar with commercial and trust lending my concern was that the client was actively seeking to over leverage himself.
“In this client’s case, his annual income veruss total debt exceeded a 10x income ratio.”
Regulators have recently moved to curb high‑DTI lending, with APRA activating limits that would cap the share of new mortgages written at six times income or above from early February.
For Algar, the key trigger was not structural complexity but the underlying risk profile.
“Risk to clients and reputational risk are the primary reasons I turn away clients. Sometimes, clients really need protecting from themselves and their own ambition,” he said.
‘Good brokers turn away loans all the time’
Mortgage Choice South Brisbane broker Daniel Liao said declining deals had become a core part of running a sustainable practice.
He explained that the decision to walk away was rarely about a single credit metric and more often centred on the behaviour and expectations sitting behind it.
“Good brokers turn away loans all the time. I’ve been turning away loans for a very long time, and I turn away loans on many different facets,” Liao said.
“Number one is if it just doesn’t work and the client’s asking us to potentially breach a boundary that I’m not willing to breach.”
Liao added that personality fit and respect for boundaries also played a major role in whether a loan proceeded.
“The main reason why I would turn away loans is if the person I am working with doesn’t align with my values or boundaries or if they’re very highly demanding outside of normal business hours,” he said.
“Brokers when they first start becoming brokers want to do everything. However, there is a time when you have to set up clear boundaries.”
Liao said that clearer personal boundaries had emerged alongside a tighter regulatory framework, with the best interests duty now forcing harder calls on whether a deal should proceed at all.
“I’m a very straight shooter, a very direct person, I’m very transparent. If I say I won’t do something, I just won’t do something and usually people just respect that,” he said.
“Usually the person will just find another broker that’s willing to do it, or find a banker because the bankers don’t have to worry about best interests.”
From ‘How to approve’ to ‘Should this be done?’
Algar said his personal no‑thanks zone had shifted markedly compared with the pre‑pandemic lending environment.
“Five years ago many banks focused on ‘how to approve a deal’ with some fast-track/low-doc options requiring very little supporting docs or background checks,” he said.
“Today’s world of higher credit standards and stronger stress testing (rightly so) means that my business and our clients are far more scrutinised.”
That shift is playing out against a backdrop of tougher serviceability tests and growing regulatory attention on investor strategies that rely on stretching borrowing power through structures rather than income.
Trust loans fall out of favour
At The Mortgage Agency, director and broker Tony Xia has gone even further, drawing a line under trust transactions altogether in recent months.
He said his team had “refrained from writing” trust loans for the past three to four months and now made that position clear upfront to new inquiries.
“This client wanted to build a property portfolio via trust lending cause they saw videos that said if you bought under different trust structures, you would have unlimited borrowing power – which we know is not sustainable,” Xia said.
Major banks have begun tightening access to loans in the name of trusts and companies, with Australia and New Zealand Bank (ANZ), Commonwealth Bank, and Macquarie Bank all moving to restrict or stop new trust lending.
Xia said the problem was not just risk, but the sheer amount of work required to bring many of these borrowers up the curve.
“These types of deals are just becoming time consuming for our business, due to the fact that the majority of consumers wanting to purchase or inquire about buying under a trust don’t understand the logistics,” he said.
He said the retreat from trusts had been gradual but decisive.
“I’d say it slowly started to change about 12 months ago, when St George Bank and ANZ made a few changes,” he said.
“Prior to 12 months ago, you’d do these deals left, right and centre.”
Best interests duty narrows the extremes – not the market, says broker
While all three brokers said that they had become more selective about the type of cases they were taking on, Algar emphasised that most clients could still be placed.
He said the introduction of the best interests duty had changed some outcomes, but not the overall ability to deliver funding.
“While the Best Interest Duty means some clients may not achieve the same outcomes as in the past, the market now offers many more lending products and solutions that can still provide a relevant outcome,” he explained.
“It is still rare that we cannot help someone at all.”
[Related: PICA warns brokers over investment modelling tool risks]
Want to see more stories from trusted news sources?
Make The Adviser a preferred news source on Google.
Click here to add The Adviser as a preferred news source.
