Banks urge COVID-19 caution as economy improves
Leading mortgage brokers say banks are cautiously curbing home loans and removing additional checks on borrowers that were introduced at the height of the coronavirus pandemic.
The trend comes against a backdrop of continued surges in new loans, but brokers say they don’t see an increase in high-risk borrowing, nor do they believe regulatory caps on home loans will be introduced. anytime soon.
With house prices are rising at their fastest pace since the late 1980s, bank credit quality is under the microscope. Regulators have repeatedly warned that they do not want to see a deterioration in credit underwriting standards, noting that they could intervene if necessary.
Several brokers, including Commonwealth Bank’s Aussie Home Loans and its merger partner Lendi, said banks had become less conservative from the peak of the pandemic last year.
Australian Managing Director James Symond has said that after banks “pulled themselves at their horns” during the peak of the pandemic, they were now taking a more “commercial” approach to credit ratings.
“We are seeing a more balanced approach from the banks. We see less conservatism, but a lot of thought is put into every client application, ”said Symond, who also predicted that real estate investors would increasingly enter the market over the next 12-18 months.
Lendi data – who announced plans to merge with Aussie last year – showed that the proportion of loan applications for which lenders request more information from the client has increased from 48% in March last year to 28% this year.
Lendi chief executive and co-founder David Hyman said the decline was a sign that banks were taking a much less conservative approach than they were at the start of the pandemic and in the aftermath of the Hayne Royal Commission.
Despite this, Mr Hyman said the proportion of loans with a high loan-to-appraisal ratio was relatively stable last year, and he didn’t think macroprudential policies were needed at this time. “There is a growing fear of missing out as prices rise, but we don’t see borrower behavior getting riskier at all levels,” he said.