Australia Tightens Lending Criteria in Favour of Reliable Borrowe

30 Sep

Property prices have begun to drop in all of the main Australian cities,  including Sydney, causing banks to tighten up on lending.

The Commonwealth Bank of Australia reduced its exposure to apartment  developers by more than AU$1bn (£546m) last year, which equated to 23%  of the market. Overall lending to property investors grew just 0.5% last year compared to 7.5% growth for owner-occupier loans which was 4.4%  higher than a year ago.

One of the reasons  for this rise in residential mortgages has been the increase in the  amount of loans approved to first-time buyers towards the end of last  year. Many Australian states, including New South Wales and Victoria,  have offered incentives to first-time buyers to help them get on the  property ladder which has also had a positive impact on the figures.

Affordable Mortgages

The Australian government is also planning to offer more affordable  mortgages to those borrowers that have good credit histories. The  Australian treasurer, Scott Morrison, recently introduced draft  legislation mandating a system known as “comprehensive credit reporting  (CCR)” that will apply to the four major banks (Commonwealth Bank,  Westpac, ANZ Bank and National Australia Bank) from July.

Under the policy, the banks will be required to hand over more detailed  credit histories on their customers to credit bureaus. The government  believes that banks have previously only provided “negative” information for customers’ credit reports, such as whether the borrower defaulted.  The new policy will require banks to also provide “positive” credit  information, such as how frequently they have paid their bills on time.

Souce: AppraisalNewsCast, a real estate news blog

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