Further to changes made by ANZ in March and Westpac in April, now all 4 major banks have tightened their rules relating to lending to Australian citizens earning their income overseas. In addition, 2nd tier lender Citibank has responded to a flood of applications diverted to them to wind back their lending to overseas based borrowers.
Typical of the changes across a range of lenders are:
- maximum lending ratio of 70% for most borrowers
- stricter limitations on which currencies are acceptable for loan servicing assessment
- applications no longer accepted from overseas based self-employed borrowers
- shading of overseas incomes by up to 40%
- removal of interest rate discounts for overseas based borrowers
- stricter rules around documents provided in languages other than English
Note: not all lenders have imposed all of the above restrictions but clearly Australian lending institutions collective appetite for loans to persons earning income outside Australia has significantly waned.
These changes have been driven by several factors including increased concerns about money laundering, and fraudulent documentation being submitted to lenders by some applicants. For example, it was reported in the Sydney Morning Herald earlier this week that Westpac and ANZ are investigating numerous instances of suspected false income declarations by Chinese borrowers.
This response by the banks will likely have a twofold effect:
- Australian citizens working overseas earning legitimate income will now find it much harder to obtain finance if they wish to invest their savings in Australian property. They will generally be required to have saved a 35% deposit and be earning income in a major trading currency to be eligible.
- it will place further pressure on property developers who have been hitherto highly dependent upon the overseas market for sales of apartments in the CBDs of our major eastern seaboard cities (often contributing to the empty building phenomenon).
If you are concerned about these changes please contact our office to obtain further information specific to your own circumstances.