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Suncorp overhauls serviceability policy

The non-major bank has introduced several changes to its income policy for mortgage serviceability assessments, which include revisions to income shading rules and the exclusion of bonus income from the calculation.

Suncorp Bank has overhauled its serviceability policy, reducing its risk appetite for non-base income.

The changes, which are effective for applications submitted from Monday (14 September), include the exclusion of bonus income from the capacity to repay (CTR) calculation.

Prior to 14 September, 80 per cent of a borrower’s bonus income was included in the CTR test.

Other changes include:

  • reclassifying casual income earned continuously (at least six months), contract/temporary income earned continuously (at least 12 months), and rental casual/holiday letting income earned continuously (at least 12 months) as secondary income rather than core income;
  • reducing the share of acceptable dividend income from 80 per cent to 60 per cent;
  • reducing the share of acceptable commissions earned continuously (at least six months) from 80 per cent to 70 per cent;
  • reducing the share of acceptable seasonal income earned continuously (at least 12 months) from 80 per cent to 70 per cent; and
  • accepting 100 per cent of overtime and allowances for nurses, police, fire and ambulance occupations.

Moreover, Suncorp has told brokers that if secondary income is more than 30 per cent of base income in the CTR calculation, applications “will be escalated to a higher credit authority”.

Suncorp revealed that all self-employed applications will be treated in the same way – referred to a higher authority for review.

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Self-employed applicants will also need to provide Suncorp with management accounts for the 2020 financial year and business activity statements for the prior 12-month period.

Buy now, pay later facilities

Suncorp has introduced new rules around considerations of debt accrued from buy now, pay later providers.

Also effective from 14 September, Suncorp has updated its credit policy to require applicants to provide a document confirming the limit and liability amount owed to a provider (e.g. Afterpay or Zip).

Suncorp is requiring brokers to ensure the limit and liability is included in the “store card” category within the CTR calculation, which will be assessed at 3.80 per cent of the approved facility limit per month.

Further, for facilities repaid in instalments (no limits), repayments are to be included in the cost of living calculation within the CTR calculation.

Capturing COVID impact

Meanwhile, Suncorp has now made it mandatory for brokers to discuss and document their client’s financial position pre-COVID, during COVID and their expected financial position post-COVID.

In order to meet this new obligation, brokers have been asked to complete Suncorp’s “COVID-19 Broker Commentary Form”, which must be included in the application prior to submission.

The bank added that funds withdrawn from superannuation funds for the purpose of assisting customers through financial hardship will not be considered as contribution towards funds to complete.

These latest changes come just weeks after Suncorp announced that it will be removing two of its credit products over the coming months to “simplify” its retail home lending offering.

As of 5 October 2020, brokers will no longer have access to Suncorp’s Access Equity Line of Credit (AE) and Annual Interest in Advance (AIIA) products.

The products will be removed from sale via all origination channels from 26 October.

The non-major bank has commenced issuing letters to existing customers with AIIA or AE products to inform them of the changes, adding that such customers would have the option of maintaining existing arrangements. 

The bank’s executive general manager, lending, Glenn Haslam, told The Adviser that the withdrawal of the AIIA and AE products was part of a broader simplification strategy. 

“Reducing the number of loan types we offer is all about simplifying the choice for our customers and to make it easier to bank with Suncorp,” he said. 

The products will continue to be offered to small-business customers. 

[Related: Suncorp launches new renovation tool]

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