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In a note sent to mortgage brokers last week, ANZ outlined how it is evolving its credit policy to enhance decision making.
An ANZ spokesperson told Mortgage Business that the bank regularly reviews its retail credit policies to ensure that lending remains prudent and aligned with risk appetite in light of the competitive, economic and regulatory environment.
“For our customers, these changes are designed to ensure that we continue to assess any application for credit in a prudent way in view of their individual circumstances,” the spokesperson said.
The change to minimum living expense values includes the introduction of income-indexed minimum living expense values (tiered by income bands) for 'single' and 'couples' with provision for up to 10 dependents.
For serviceability, ANZ will continue to use the higher of (a) the customer's stated expenses or (b) the new applicable minimum living expense.
ANZ also announced a change to the assessment of some income types, including the introduction of shading to 80 per cent for overtime and commission income when calculating serviceability.
A change to rental shading from 80 per cent to 75 per cent when calculating serviceability has also been implemented.
Meanwhile, ANZ’s interest rate buffer will drop from 2.75 per cent to 2.25 per cent for all ANZ facilities and OFI Home Loan facilities. There will be no change to the current interest rate floor.
ANZ also announced changes to its interest-only renewal policy. Owner-occupier home loans will require a full Credit Critical (CC) application once the total interest only term reaches five years (since the last full Credit Critical application).
All of the above changes are effective 4 April.
However, changes to foreign income thresholds and increased document requirements came into effect this week (29 March), and affect all Australian customers and permanent residents.
ANZ will no longer accept applications for loans based on 100 per cent foreign income. This related to the total income being presented, not the percentage of income being relied upon for servicing.
Loans based on greater than 50 per cent foreign income will have a maximum LVR of 70 per cent, cannot be held in a company name, do not allow guarantor arrangements and require new increased income documentation.
Standard policy applies to loans based on less than 50 per cent foreign income, however increased documentation is now applicable.