ANZ Bank has just announced several changes to its security guarantee policy, including limiting the leverage that family members can take on to assist property purchases.

As Australia approaches the end of a multi-year property boom, banks are losing their appetite for risks and are beginning to make changes to their lending policies. In the case of ANZ, the bank has limited borrowers to just one family guarantor, with the loan capped at 107 per cent of the property price. ANZ also limited who can act as a guarantor to family members, including parents/step-parents, grandparents, siblings, and children.

“Total lending against the guarantor’s property cannot exceed 70 per cent of the fair market value of the property,” ANZ said in a note. “Maximum amount of limited guarantee must be 50 per cent or less of the FMV of the property the guarantor is providing as security.”

Because of the tighter mortgage lending standards, Mortgage Choice chief John Flavell believes that it will impact the confidence of first home buyers, whose proportion fell to 13.9 per cent last month--the lowest since 2004.

“While I do not believe ANZ’s change to guarantor loans will adversely impact many first time buyers, it may negatively impact confidence,” he said.

But for ANZ, this move is actually beneficial to everyone involved.

“We have introduced a cap on the security so that a family member can only use 50 per cent of the value of their home in helping a first home buyer. This protects the security provider in case something goes wrong with the first home buyer’s finances,” said an ANZ spokesman.

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