Australian Housing Dynamics and Affordability
AUSTRALIA HOME LOANS
UNDERWRITING PRACTICES AND POLICY CHANGES¹ - JUNE 2015 TO SEPTEMBER 2019
ANZ LVR Caps
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LVR cap reduced to 70% in high risk mining towns in June 2015; reduced to 90% for investment loans (July 2015)
Restricted new housing lending (new security to ANZ) to max. 80% LVR for all apartments within 7 inner city Brisbane postcodes (October 2017)
Restricted investment lending (new security to ANZ) to max 80% LVR for all apartments within 4 inner city Perth postcodes (October 2017)
Increase maximum LVR on interest only investment loans from 80% to 90% in March 2019 (excluding Mining towns and Apartment restrictions)
ANZ Assessment
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Interest rate floor (new & existing lending) at 7.25% (August 2015)
Income adjusted living expense floor (HEM); 20% haircut for overtime & commission; Increased income discount factor for residential rental income from 20%
to 25% (April 2016)
Limited acceptance of foreign income to demonstrate serviceability and tightened controls on verification (September 2016)
Minimum default housing expense (rent/board) applied to all borrowers not living in their own home & seeking RILS² or EMAS³ (July 2017)
IO renewals became Credit Critical events (full income verification & serviceability test) including P&I to IO & converting to or extending IO term (March 2018)
Enhanced Responsible Lending Requirements including additional enquiry and increase in minimum monthly credit card expense (November 2018)
Interest rate floor (new & existing lending) at 5.50% and interest rate buffer of 2.50% (July 2019)
ANZ Product and Other Limitations
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Decreased max. IO term of owner occupied loans to 5 years (January 2017)
Withdrew lending to non-residents (September 2016); tightened acceptances for guarantees (December 2016); clarified residential lending to trading
companies is not acceptable (December 2017)
Increased maximum term of interest only investment loans from 5 to 10 years (from March 2019)
ANZ PORTFOLIO BORROWING CAPACITY SUMMARY5
DRIVERS OF REDUCTION IN CUSTOMER BORROWING
CAPACITY (v 2015)4
30% reduction in
borrowing capacity
>20% reduction in
borrowing capacity
10% of
customers
borrowing at
their
Contribution
to reduction
in borrowing
capacity
maximum
capacity
Sep-18
HEM changes
Servicing rate floor or buffer
Sep-19
Income haircuts
FY16
FY17
Customers with additional borrowing capacity
FY18
FY19
Customers borrowing at maximum capacity
1. 2015 to 2019 material changes to lending standards and underwriting 2. Residential Investment Loans 3. Equity Manager Accounts. 4. ANZ modelled outcome of 4 borrowing scenarios indexed to
2015 and using a customer lending rate of 3.90%: i. Couple, no dependents, ii. Single, no dependents, iii. Couple 2 dependents, iv. Couple, no dependents, higher income earners, where application ANZ
parameters such as income are held steady while policy components are adjusted based on 2015 and 2019 settings. 5. Based on financial years.
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