Mortgage business logo

Non-bank winds back lending restrictions

A non-bank lender has rolled back a number of credit policy changes it imposed in response to the COVID-19 crisis.

In March, non-bank lender Bluestone introduced a number of lending restrictions following the initial economic shock from the COVID-19 pandemic.

The restrictions included a 35 bps interest rate hike across all products and loan-to-value ratio (LVR) tiers for new lending, reductions to the maximum LVR for principal and interest (P&I) and interest-only loans, cash-out limit reductions, and the temporary withdrawal of its lien of credit product.

The non-bank also temporarily suspended lending to borrowers employed in industries hardest hit by the COVID-19 crisis – tourism, entertainment, hospitality and construction – and excluded several income types from its serviceability calculator.   

However, Bluestone has now reversed several of its changes and has reduced interest rates by between 10-110 bps across its entire product line.

The non-bank’s line of credit offering has been reinstated (with the exception of its Specialist product), and cash-out limits have been increased to $100,000 for prime products and $50,000 for all other products.

But the suspension of lending to borrowers employed in industries vulnerable to lockdown measures will remain in place.  

md discover

“The economic impact of COVID-19 is still unfolding, so for the time being we will continue to exclude income received from highly impacted industries,” Bluestone told brokers.

Bluestone wasn’t the only lender to lower its risk appetite for lending to borrowers, with its peers across both the non-bank and ADI space tightening their credit policies in response to COVID-19.

Analysts, including Moody’s vice president and senior credit officer Alena Chen, continue to forecast a sharp rise in credit losses over the coming months, particularly once mortgage deferral period expire in September.  

“Australia’s unemployment rate increased to 6.2 per cent in April from 5.2 per cent in March, while underemployment increased to 13.7 per cent from 8.8 per cent over the same period, with the stressed economic conditions to constrain borrowers’ ability to make mortgage repayments,” he said.  

S&P Global Ratings has reported that it is forecasting an 85 bps increase in credit losses across the Australian banking sector’s loan portfolio in the 2020 financial year (FY20).

The 85 bps increase, which is expected to moderate to 50 bps in 2021, amounts to approximately $29 billion in gross loans, nearly six times higher than the record low in FY19.

[Related: ANZ joins peers, revises IO policy]

Share this article

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

brokerpulse graph

What are the main barriers to securing a mortgage at the moment?