The non-major lender has announced changes to its home loan serviceability policy, which includes a reduction to its floor rate.
In line with an update to its net surplus calculator, Adelaide Bank has lowered its floor rate for mortgage serviceability assessments from 5.75 per cent to 5.25 per cent, effective immediately.
Accordingly, the lender has also revised its method for qualifying repayments on existing home loans.
For existing home loans with a contracted interest rate of less than 5.25 per cent, the bank will apply the higher of a 2.50 per cent buffer or the 5.25 per cent floor rate.
The higher of a 2.25 per cent buffer or a 7.75 per cent floor rate will apply for loans with a contracted rate above 5.25 per cent.
Changes to company and trustee applications
Adelaide Bank has also updated its lending policy for applications involving a company, which includes a family or discretionary trust with a company as trustee.
Such applicants must now meet the following requirements:
- must operate solely for non-business or non-trading purposes;
- must have less than five mortgaged residential properties;
- the loan(s) must be guaranteed by an individual(s), or in the case of a family or discretionary trust, all trustees or beneficiaries must be individuals; and
- personal guarantees must be obtained from all directors, or in the case of the trust, all adult beneficiaries.
Moreover, loans to company applicants are restricted to:
- purchase of residential investment property (including vacant land);
- construction, renovation or maintenance of residential investment properties
- refinance of loan(s) for either or both of the above purposes
These latest revisions come less than a month after Adelaide Bank tightened requirements for bridging finance applications.
The bank also joined several other lenders in requiring brokers to ramp up their serviceability probes for self-employed applicants.
[Related: Adelaide Bank tightens serviceability policy]