“Generally where a customer is in a severely affected industry such as tourism, hospitality or retail, then their loan is declined unless we can prove that their income is unaffected,” says Otto Dargan, managing director at homeloanexperts.com.au. Dargan says casual income in particular is seen as extremely high risk and only a few lenders are accepting it at all. “Banks are far less likely to rely on unstable income types, for example casual, contract, temporary, seasonal, commission, overtime or bonuses. Usually they’ll use the base income only and may use a small per cent of any additional income.” Dargan says some lenders have also dropped the maximum loan-to-value ratio (LVR) they will consider.
Financial adviser, mortgage broker and founder of Wealthful Chris Bates says Macquarie Bank issued new guidelines for brokers dealing with clients in high risk industries. In some cases Macquarie may have its credit assessor contact a PAYG applicant’s employer to confirm employment status and current income. Bates says bank policies will continue to change as banks shift from helping existing customers to protecting their loan books with new customers. Bates warned that lenders might also pull out of postcodes they considered high risk areas, especially if those areas had an oversupply of housing.
Chris Foster-Ramsay of Foster Ramsay Finance says in addition to Macquarie Bank he knows of two other lenders who have flagged they will no longer lend to those in high-risk industries, including tourism, hospitality and airlines, while ME Bank has confirmed it may be checking loans that have already been approved but are not yet settled to ensure the bank is lending responsibly. “If you’ve got a loan that’s been approved, they will be making spot-checks to make sure applicants haven’t lost their job,” he says. “At worst the loan will not be funded and you’ll have a very problematic case on your hands, but we hope that commonsense will prevail and an arrangement will be made between the lender and borrower.”
On the other hand, if your income is assured then Dargan believes the next few months are likely to be one of the best times to buy. “Rates are at all-time lows and you’re getting better deals than you ever have,” he says.
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For more information on lending during Covid-19 visit domain.com.au