In response to growing risks in the housing market, National Australia Bank (NAB) has compiled a confidential borrowers’ blacklist of more than 600 towns and suburbs where it has capped lending to buyers.

According to internal documents used by NAB to explain its change in strategy to mortgage brokers, buyers living in any of the 120 blacklisted postcodes will need a deposit of as much as 30% to qualify for a loan.

Dozens of suburbs were added to NAB’s list last Saturday, and new measures designed to tighten the scrutiny of household expenditure used to assess loan eligibility were also introduced.

NAB’s list is divided into two categories: Group A and Group B. Postcodes in Group A have loan-to-value ratios capped at 70%, and postcodes in Group B have loan-to-value ratios capped at 80%.     

Large swathes of rural Western Australia, South Australia, Queensland, and the Northern Territory were the most severely affected by the new lending caps. Buyers in these states and territories now need a 30% deposit to qualify for a loan. In contrast, those wanting to buy an inner-city apartment in many suburbs in Brisbane, Melbourne, and Sydney will need a 20% deposit.

"NAB takes into account a range of economic factors, and regularly monitors the performance of local markets to ensure we continue to lend responsibly and sustainably," a bank spokesman said.

"We recognise that no two suburbs are the same, and there are some geographic areas across Australia which have been impacted by local economic conditions. As a responsible lender, we adopt strategies in these geographic areas that seek to reduce the risk to our customers and our business."

Other major lenders, including Westpac, are set to announce a tightening of their lending criteria after years of extensive discounting. Westpac and its subsidiaries will decrease the maximum loan-to-value ratio to 95% (from 97% and lower) for residential investment loans, display homes, serviced apartments, as well as properties that are being converted to residential from other uses.