ME is the latest bank to impose lending restrictions on foreign buyers, following recent moves by other non-majors as well as the big four.
ME general manager of credit risk Michael Hendricks said the bank has, in line with industry moves, restricted the use of foreign income to service mortgages. These restrictions also apply to Australian citizens and permanent residents who are employed overseas.
“The primary driver for the latter is the ability to verify the foreign income,” Mr Hendricks said in a statement to Mortgage Business.
“For a bank our size, it difficult for us to put in place processes at suitable costs to manage this segment.”
“These are prudential measures designed to ensure our flow of new business is in line with our target market. This is particularly important in light of changes by the majors, which can increase demand for smaller banks who haven’t also applied the same policy.”
AMP has also implemented a two-tiered system for foreign currencies as part of new LVR restrictions.
Where foreign income is used for serviceability from a tier 1 currency – the Canadian dollar, the British pound, the Hong Kong dollar, the Japanese yen, the New Zealand dollar, the Singapore dollar and the US dollar – the maximum LVR is now 70 per cent.
Where the Chinese yuan (a tier 2 currency) is used for serviceability, the LVR is now 50 per cent.
Furthermore, AMP is now only accepting 80 per cent of income derived from tier 1 currencies and 50 per cent of income derived from the Chinese yuan for lending purposes, while foreign self-employed income is “not acceptable”.
ME’s announcement comes after AMP bank exited the non-resident lending space, classifying foreign borrowers as an “unacceptable borrower type, unless a spouse/de facto is a citizen or permanent resident of Australia or New Zealand and a borrower of the loan”.