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NAB lowers its DTI

The big four bank is decreasing its debt-to-income threshold to “meet regulatory obligations” and “lend responsibly”.

National Australia Bank (NAB) has told brokers that it is decreaing its debt-to-income (DTI) servicing ratio from nine to eight times income.

NAB said a number of policy and serviceability changes were being made this month, including “simplifying” its home lending policy by removing loan-to-income (LTI) as an assessment measure and instead relying on its debt-to-income (DTI) when assessing customers’ applications.

The changes came into effect on Saturday (21 May), with the bank updating its serviceability calculator available to brokers, removing the LTI measure and lowering the DTI to eight times.

As the DTI ratio is used to determine a customer’s ability to repay their home loan, based on their income, the lower threshold will enable NAB to “protect customers” by ensuring their lending request is suitable for their income level.

Examples of when a high DTI application will be considered is when bridging finance, internal refinances and applications managed with NAB Assist.

Indeed, prices are more competitive for lower DTI home lending, particularly less than six times.

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Green bonds grow

NAB had also announced it has priced a €1 billion green bond after receiving around €2.3 billion worth of orders last week, with proceeds allocated towards renewable energy projects.

The bank has taken a stance on achieving net zero, committing to aligning its lending portfolio to net-zero emission by 2050.

NAB group treasurer Tom Wirth said the deal again showed the significant interest in sustainable investments, despite some challenging recent market conditions.

“It’s been great to see such strong demand during a period of market volatility,” Mr Wirth said.

“We are focused on aligning our business to support the transition to net zero, and this includes working with our customers to help them decarbonise.

“Our green bond issuance is one part of our climate change strategy as we invest in the opportunities associated with the transition to a low emissions economy.

“The funding supports the resilience of our balance sheet and we’re pleased to have a quality pool of global investors back our latest green bond.”

NAB has now issued five Climate Bond Initiative (CBI) certified green bonds and one CBI certified green RMBS tranche since becoming the first Australian issuer of a Certified Green Bond under the Climate Bonds Standard in 2014.

NAB has also closed six ESG-linked derivatives in the European market and one in Australia, and one ESG-linked FX derivative.

[Related: DTI limits and buffers in APRA's arsenal to manage credit risk]

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