Major banks tighten lending guidelines

CBA has introduced the Credit Assessment Summary (CAS) which will be used for all home loan and line of credit applications involving personal borrowers. This document came into effect on 2 December 2017 and presents a summary of information provided on behalf of the borrower or which the bank has verified, including:

  • A summary of loan requirements and objectives
  • Personal details and financial information
  • Total monthly living expenses at a household level
  • Information about the credit applied for

CBA has also introduced new credit policy changes, effective 4 December 2017. These include:

  • Reducing the maximum LVR without LMI from 80% to 70% for selected securities in particular postcodes
  • Reducing the amount of rental income and negative gearing eligible for servicing
  • Changing eligibility for LMI waivers including all professional packages and LMI offers for customers financing security types in some postcodes

Finally, CBA has also made changes to its consumer lending credit policy with brokers having to consider the following when completing any loan applications:

  • Verification of all liabilities and commitments held with other financial institutions
  • Verification of the bank's expanded requirements for liabilities and commitments
  • Amended requirements for acceptable rental income verification
  • Removal of fully maintain company motor vehicle income type
  • Introduction of a notional monthly rental commitment for those living rent-free
  • Removal of charge cards as a liability for servicing

This follows Westpac who brought in a number of responsible lending changes affecting how brokers enter in requirements and objectives questions for clients. The questions are designed to help brokers understand their client motivations, align the products to their needs, and prompt brokers to explain consequences around each choice of product to the client. Additional R&O questions will also apply for each applicant of the loan, including for clients with foreseeable changes, special circumstances, current financial hardship, or those approaching retirement age.