Lenders announce home loan policy changes

Two non-major banks have announced changes to their interest-only and investor loans.

In a recent update to its brokers, Citibank announced that it is updating its home loan policies to reflect changes in regulatory and market conditions.

Effective last Thursday (13 April), for new Citibank applications, the interest-only repayment option on standard variable loans and the ‘Mortgage Power’ line of credit will not be available for loans solely with owner-occupied security, all non-resident loans, loans reliant on foreign income and loans which require FIRB approval.

The lender said that interest-only repayments will therefore only be allowed for resident loans secured by investment property, however unexpired pipeline deals remain unaffected.

For loans with mixed securities (owner-occupied and investment properties cross-collaterised), interest-only repayments or Mortgage Power is only permitted for the portion of the loan that exceeds the value of the owner-occupied security.

Also effective last Thursday, interest-only repayments will not be available where the LVR exceeds 80 per cent.

Additionally, Citi’s offset mortgage product is no longer available for new Citigold non-resident and foreign income applications.

Meanwhile, challenger bank ME will no longer be accepting applications for investor home loans with an LVR greater than 90 per cent and interest-only home loans with an LVR greater than 90 per cent, including both owner-occupier and investor.

The bank said it has not changed its credit policy for owner-occupier ‘principal and interest’ home loans.

“The change in credit policy has been made to ensure ME complies with new regulations brought in by APRA to manage the risks of rising house prices,” an ME spokesperson said.

“Specifically, it ensures we comply with the requirement to maintain investor lending within a 10 per cent growth limit and interest-only lending within a 30 per cent growth limit. Recent changes by other banks to investor, interest-only and LVR credit policies have seen an increase in demand for ME’s home loan products, including for these types of loans.”

[Related: Investors could generate risks to future health of economy]

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Francesca Krakue

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