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Bank revises home lending policy

A non-major lender has announced a number of credit policy changes, including the addition of a maximum debt to income ratio.

Teachers Mutual Bank (TMB) has announced a series of lending policy changes applicable across all of its brands, effective 19 February.

TMB’s changes include:

  • Increasing overtime/shift allowance for nursing to 100 per cent of income to be used in the servicing assessment, in line with other essential services of ambulance, fire and rescue and police.
  • Allowing 100 per cent of maternity leave income to be used in the servicing assessment, across all applicant types, on the basis that the applicant will return to work within 12 months and that evidence of the return to work date is supplied.
  • Increasing the maximum loan-to-value ratio (LVR) for investor and interest-only home loans from 80 per cent to 90 per cent, prior to the capitalisation of the premiums for one or both of LMI and/or mortgage repayment insurance and any bank fees.
  • Reducing the minimum net monthly surplus (NMS) for investor and interest-only home loans from $300 to $0, which would bring the NMS in line with owner-occupier principal and interest loans.

Further to these changes, TMB has announced that it will be introducing a maximum debt to income (DTI), which is now a requirement on all home loan applications.

TMB stated that an applicant must be able to demonstrate a DTI ratio of less than or equal to eight times and is calculated with the applicant’s total financial debt commitments divided by their total gross income.

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However, TMB has excluded the following liabilities from the DTI ratio calculation:

  • Commercial bill
  • Contingent liability
  • Loan as guarantor
  • Maintenance
  • Outstanding taxation

The bank added that any application that produces a DTI ratio of more than eight times is excluded from the policy and will be declined.

TMB stated that the DTI policy has been introduced to “ensure the bank maintains sound residential mortgage lending practices” and continues to meet the regulatory obligations detailed by the Australian Prudential Regulation Authority.

TMB noted that any application that has been conditionally approved prior to 19 February 2019 but not funded as of that date does not need to be reassessed under the new lending policies.

The bank added that all new applications, and applications where the conditional approval has expired (i.e. 90-day approval period), will be assessed using the current applicable lending policy at that time.

[Related: Bank lifts home loan rates]

Bank revises home lending policy
mortgagebusiness

Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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