Even though the Big Four have dialled back on their lending to foreign nationals, the demand for finance hasn’t decreased. Other lenders (mainly second-tier) have moved to fill the gap in the market, and developers have also begun lending to foreign nationals.

However, with lending hurdles higher across the board, foreign investors looking to obtain finance in Australia are often left disappointed in the current environment.

The Big Four’s lending criteria

While the Big Four are not writing new loans for non-residents, some are still considering loans for temporary visa holders.

Westpac is not writing new loans for non-residents, and Commonwealth Bank of Australia (CBA) doesn’t provide loans to non-residents. CBA has a maximum loan-to-value ratio of 70% for selected temporary visa holders who earn an income in Australia. 

Australia and New Zealand Banking Group (ANZ) no longer lends to foreign nationals, and all applicants must be permanent residents of Australia. ANZ also accepts citizens of New Zealand and 457 visa holders. Moreover, applicants are allowed a maximum of 30% foreign income, with specific documentation required to verify it.

For National Australia Bank (NAB), a maximum loan-to-value ratio of 60% applies for temporary visa holders living in Australia. Meanwhile, a maximum loan-to-value ratio of 70% applies for citizens of New Zealand as well as permanent residents living overseas. All foreign income must be “shaded” by 40% when assessing serviceability.

HSBC and Citigroup are said to be filling the gap when finance isn’t provided by the Big Four.

Second-tier lenders’ lending criteria

Some second-tier lenders are still lending to foreign nationals. However, these applicants must meet strict credit criteria. Also, maximum LVRs have been significantly reduced over the last 18 months, which has made obtaining a non-resident loan quite challenging. 

Though the Big Four’s tighter lending restrictions have simply shifted demand to other lenders, alternative lenders are also constrained in their lending.
“These lenders in many cases have increased interest rates, tightened credit criteria and reduced maximum LVRs on non-resident loans,” John Kolenda, managing director of 1300HomeLoan, told SCHWARTZWILLIAMS. “Many non-resident borrowers may find difficulty obtaining a loan from all lenders at the moment."