Stricter Home Loan Rules Announces Commonwealth Bank Of Australia
On Friday Commonwealth Bank of Australia (CBA) declared more stringent rules for home loan customers. As the lenders of the mortgage market faced slow growth, new rules are introduced with regard to its credit policies. The CBA announced a reduction in the discounts allowed on interest rate to new investor borrowers.
CBA proposed stricter background investigations regarding new borrowers so as to avoid any kind of forgery or fraudulent activities would be made by the mortgage brokers. A servicing loading of 20 percent would be made applicable to all repayments by the CBA on existing home loans and credit amount held by the borrowers. The CBA further tabled an increase in the amount of the repayment from AU$1000 per month to AU$1200 per month.
CBA announced that loan to valuation ratio would not increase 95 percent in case of owner occupied home loans and would tighten lines when investigating about the income of the borrowers. Considering loans based on the income gathered by working overtime or receiving bonuses would be restricted to 80 percent. However, LVRs of up to 97 percent would be continued to allow as mentioned in the company’s website policies which would also include the cost of insurance incase of mortgage loans.
According to the Sydney Morning Herald, the bank would not take into account tax breaks borrowers receive from negative gearing when deciding whether to approve the loan application. It stated that in the best interest of the bank these changes had to be proposed so as to meet the financial needs of the customers and prudent lending standards.
Lastly, the bank said that the proposed changes are in accordance with the Australian Prudential Regulation Authority that allowed a cap of 10 percent per year. The company further confirmed that changes undertaken could be found to be similar with other banks’ policies and made it mandatory to rise above target set.
Contact the writer on priya.shayani@gmail.com