Westpac Group-owned Bank of Melbourne admitted that increasing the deposit overseas borrowers need to be eligible for a loan by up to 22 per cent was “an error in our broker communications.”
“The loan to value ratio for temporary visa residents remains 90 per cent, not 70 per cent as previously stated,” said a bank spokesperson. “We have strengthened our policies regarding non-residents lending and foreign income, which represents a very small component of our loan book.”
Many mortgage brokers believe that this “tweaking and re-tweaking” of policies was part of the bank’s strategy to rapidly build market share in a sector that other lenders are increasingly nervous about. After all, the Bank of Melbourne waited two weeks to amend the error, describing it in confidential communications to brokers as a “revised policy update.” Hence, it created speculation that it had backflipped the earlier policy change.
House sales have remained strong in both Sydney and Melbourne as the official interest rate hits a record low of 1.75 per cent. However, buyers are nervous about potential changes to negative gearing, apartment glut, and housing affordability.
On the other hand, lenders are more cautious with overseas buyer applications especially the ones from China, as there is growing evidence that these borrowers are using incomplete or fraudulent loan documents to possibly launder money. Various banks have tightened their lending policies in recent weeks as a response to these revelations, with Australia’s big four banks leading the way.
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