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Brokers will no longer be able to use borrowers' proposed investment income generated by margin lending to service a new home loan with the CBA.
In an announcement to their broker channel, CBA said the amount of existing investment income that can be used to service a loan would be capped, effective immediately, and new rules would be introduced for calculating investment income where the client has a margin loan.
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A spokesperson for the bank told Mortgage Business that CBA’s decision to tighten policy was a reflection of changes to the current market.
“We cannot rely on investment income in the current economic climate and as such, the bank has been conducting a wide review of its serviceability and this is only one small piece of the broader review,” the spokesperson said.
The current health of the economy has also spurred other banking institutions on to look at conducting a wide ranging review of their serviceability, the spokesperson said.
The amount of investment income used to service a loan is based on the current Deeming Rate.
The Deeming Rate is equivalent to the top tier interest rate used for a Pensioner Security Account (PSA) and is currently 3 per cent p.a.
The maximum Deeming Rate to be used to calculate investment income will now be 5 per cent p.a.
