The Commonwealth Bank of Australia is the latest lender to join in the foreign mortgage crackdown as it announced Monday that it would no longer accept loan applications using self-employed foreign income. Borrowers with a temporary Australian residency and are receiving foreign income will also not be allowed to procure home loans.
"Applications involving these customers represent a significantly low proportion of our total home loan applications and these are verified and assessed in line with Commonwealth Bank's lending policies including requirements for income earned in Australia," said a bank spokesman.
CBA also reduced its maximum loan-to-value ratio for temporary residents from 80 per cent to 70 per cent, which is the same as rival ANZ's LVR.
According to John Flavell, the chief broker of Mortgage Choice, CBA's changes reflected trends across the market as lenders are now focusing on income verification to make sure that customers could service loans.
CBA's actions came following the Reserve Bank's statement regarding the fragilities in the property market. It warned that the apartment market could experience some correction, especially in Sydney, Melbourne, and Brisbane. It also expressed concern regarding the possible easing of demand from Chinese buyers, which could lead to bank losses.
"If a significant subset of buyers reduces their demand sharply, this can weigh on housing prices… and so lead to losses on the banks' broader property-related exposures," the RBA said.
Furthermore, according to Finder.com.au, the average home loan size fell 7.71 per cent in the three months to February to $357,200 – its biggest drop since the year 2000.
Collections: Mortgage News