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Non-banks lower risk appetites

The economic consequences of the coronavirus pandemic have prompted more non-bank lenders to make changes to their credit policies, which include a tightening of risk appetite.

Non-bank lenders Pepper Money and Latitude have announced changes to their lending policies in response to growing economic uncertainty caused by the coronavirus (COVID-19) pandemic.

Effective from Friday, 27 March, Pepper has withdrawn rate and fee promotions on new loans, which it said would enable it to better support existing mortgage customers impacted by the outbreak, particularly those working in the tourism, hospitality, and aviation sectors.

Meanwhile, Latitude has lowered its credit risk appetite to ensure it “continues to be a responsible lender”, tightening its serviceability criteria for new borrowings. 


Latitude's changes are also effective from Friday, 27 March.

Pepper Money and Latitude’s announcements came less than a week after Bluestone announced a number of revisions to its credit policy.

Bluestone’s changes included a 35 bps rate hike across all products and loan-to-value ratio (LVR) tiers, a 50 bps loading on investment loans, and a scrapping of its 10 bps discount on fixed rate products.

Bluestone also reduced its maximum LVR to 80 per cent on all principal and interest loans, and to 75 per cent on all interest-only loans, and temporarily withdrew its line of credit product.

Like Latitude, Bluestone’s changes included restrictions on loan applications from borrowers “highly impacted” by the economic fallout from the coronavirus.

These moves from the non-bank sector come despite the government and the Reserve Bank of Australia’s (RBA) efforts to provide low-cost funding to lenders, including non-banks, in order to facilitate the supply of credit to households and businesses.

Earlier this month, the RBA’s monetary policy board decided to cut the official cash rate to a new record low of 0.25 per cent, commence quantitative easing and launch a new $90 billion term funding facility for businesses. 

Following the RBA’s emergency cut, the Morrison government announced it would inject up to $15 billion in funding to support lending to consumers and businesses.

The funds will be supplied to the Australian Office of Financial Management, which will invest the capital in wholesale funding markets used by small authorised deposit-taking institutions (ADIs) and non-ADI lenders.

Most recently, the government announced a new coronavirus SME Guarantee Scheme.

Under the scheme, the government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs. 

The government aims to “enhance lenders’ willingness and ability to provide credit to SMEs” and can support up to $40 billion of lending to SMEs (with the government guaranteeing up to $20 billion).

[Related: Lender hikes rates, overhauls policy amid COVID drag]

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