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Amid growing credit quality concerns and market uncertainty sparked by the coronavirus (COVID-19) outbreak, non-bank lender Bluestone has overhauled its product and service offering amid a "rise in funding costs".
The lender has hiked rates by 35 bps across all products and loan-to-value ratio (LVR) tiers, effective immediately for new customers.
Bluestone also imposed a loading of 50 bps on all investment loans and scrapped its 10 bps discount on fixed-rate loans.
Moreover, the non-bank reduced its maximum LVR to 80 per cent on all principal and interest loans, and to 75 per cent on all interest-only loans.
On top of these price increases, the non-bank has also temporarily withdrawn its line of credit product.
In addition, loan applications from borrowers working in industries “highly impacted” by the coronavirus outbreak – tourism, hospitality, entertainment and retail – have been temporarily suspended, with several income types also now excluded from Bluestone’s serviceability calculator.
Such income types include earnings derived from shares and dividends, holiday rentals, short-term accommodation, overtime, commissions and bonuses.
Borrowers working in essential services, which include health professionals, emergency service personnel, corrections officers and police are exempt from changes to provisions relating to acceptable income types.
The lender also temporarily ceased conducting upfront valuations, which it will now only conduct upon conditional approval of a loan.
Decisions 'not taken lightly'
Bluestone told brokers that its changes were made in response to “unprecedented” conditions in the domestic and global economy as a result of the pandemic.
“We are monitoring and managing the situation in real time to ensure we continue to look after our staff and our customers,” the non-bank noted.
“Our decisions on interest rates and credit policy are not taken lightly and reflect an increase to wholesale funding costs, the changing market environment and our requirement to continue being responsible when assessing borrowers,” it said.
These changes 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).