Home loans get harder post-Royal Commission?

For home-loan borrowers who want to make sense of what the recommendations of the Royal Commission will mean for their application, there is actually bad and good news.

Good news? Applying for a mortgage will not get more difficult after the release of the report. Bad news? The increased inquiry on applicants' expenses and income is here to stay. This means that the stricter lending rules laid out over the past months will persist.

CoreLogic research analyst Cameron Kusher said the lending environment is at an early stage of a "new normal" where there is increased scrutiny on borrowers' expenses and servicing capacity.

"There were no additional recommendations that borrower credit assessment should be tightened further, and perhaps surprisingly, the Household Expenditure Measure (HEM) hasn't been ruled out as a valid benchmark for assessing borrower expenses, implying credit availability is not likely to worsen any further," he told The Daily Telegraph.

Citing a report from Moody's Investors Service, Nine News said banks and other lenders have started to tighten their lending screws in the recent past, cutting their dependence on HEM in analysing home loan applications. This move is attributed as the main driver of the slowing credit growth.

"The commission's decision not to tighten lending criteria removes an additional source of negative pressure for the housing market, by lowering the risk of an even deeper contraction of housing credit," the report said.

Kusher believes that the recommendations will not worsen the tight-credit lending environment and will not make any substantial changes in the current housing market trends. However, owner-occupiers might be able to get back to their feet and gain the momentum they lost when investors took over the market.

"As housing affordability gradually improves and owner occupiers continue to benefit from lower mortgage rates relative to investors, we are likely to see an organic shift towards owner occupiers comprising a larger share of the market than what we have seen over recent years," he said.