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automatic teller machine (ATM) in central Sydney November 12, 2014. National Australia Bank said on Wednesday it was moving to settle a class action brought against Australia's major banks over fees for late payment, opening the door to millions of dollars in compensation for disgruntled customers. The class action, Australia's largest, was brought in August by law firm Maurice Blackburn against NAB, Australia and New Zealand Banking Group Ltd, Westpac Banking Corp , Westpac units St George and BankSA, and Citigroup Inc's Citibank over late payment fees that it claims were excessive and unfair. Reuters/David Gray

Some Australian homebuyers could be pushed to make a deposit of at least 20 percent in advance, after the National Australia Bank this week released a list of postcodes across the country where it noticed rising risks of mortgage defaults.

NAB said the postcode policy would be effective for all loan applications received after Sep. 18 of buyers in the identified areas, including 34 Sydney postcodes.

It also marked 22 postcodes in Western Australia and 11 postcodes in Queensland where credit risks are believed to have shrunk considerably. In contrast, NAB could flag only five postcodes from Victoria.

According to the Sydney Morning Herald, NAB had sent out a note to mortgage brokers saying that it would limit its loan-to-valuation ratio. In other words, it is capping the percentage of a property's purchase price it would lend to these “restricted postcodes”.

Meanwhile, the highest risk postcodes, which NAB had red-flagged and assigned as Group A, fell under the domination of mining areas in WA and Queensland.

In these areas, NAB said it will implement about a 70 percent on loan-to-valuation ratios for new lending, leaving borrowers to pay a deposit of at least 30 percent. It also included a second group of "Group B" postcodes, where it could cap about 80 percent LVRs for new lending. Most Sydney suburbs, including Glebe and Chippendale, Campsie, Kingsgrove, Chatswood, Baulkham Hills and Cabramatta, came under Group B, totalling to 34 postcodes among the 43 Group B postcodes listed by the NAB.

The five Melbourne suburbs that have been listed under Group B include the Melbourne CBD, St Kilda Road Central and Abbotsford. In addition, Adelaide, Perth and Brisbane would also have LVRs capped at 80 percent.

“This is a very normal practice for any bank," a NAB spokeswoman told SMH. "We recognise that in any property market, no two suburbs are the same and these strategies take into account a range of economic factors and provide an extra level of caution to our risk settings," she further added.

Brokers have been surprised by the bank’s stance, believing that it is unusual to take such a cautious approach towards suburbs in Sydney.

The announcement of the LVRs comes after NAB chief risk officer David Gall said the bank had developed a list of 40 hostpots but did not identify all the areas. The managing director of mortgage broker Homeloanexperts.com.au, Otto Dargan, said the policy would affect first home buyers as they typically have less capital for deposits.

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