Why has getting a home loan become harder?
Since the Royal Commission, the Banks have undertaken an overhaul of their lending processes. Previously, you would fill in your loan application and write down all your information, which the Bank would rely on to process your application.
The latest research by the UBS Evidence Lab found in 2018 that more than a 1/3 of applicants had lied on their home loan application. Either over estimating their income or underestimating their expenses. This then allowed applicants to borrow more money.
The Banks have really expanded their full requirements and now stringently verify all the information you write down. What does this mean for you? Any information that you provide on your Loan Application will need to verified. Things such as Bank Statements, Pay Slips, Car Loan Statements, even your Afterpay Statements. You can’t just tell them anymore, you need to show them. They will even review your Savings Account Statement so they can assess what your living expenses are. Yes, your monthly massage and hairdresser payments will be taken into account as living expenses when calculating the affordability of your loan.
Another thing they are also considering is your retirement age. Obviously, they can’t discriminate in respect to your age, but the rule being applied to applications is the length of time between when the loan is due to be paid out and the anticipated retirement age. This means, no more 30 year loans to a 60 year old .
In an interview with the ABC, Chief Executive of the ANZ Bank, Shayne Elliott said, “the amount of credit people can get has gone down just because of tighter standards”.
As discussed here, he was also very clear in saying “because of the changes with the regulation, because of the scrutiny of the Royal Commission, because the banks are trying to do the right thing — we are asking a lot more questions and taking longer for people to get approved or they have to come with more evidence”.
Because of all this, the Banks are, as expected, taking longer for the loans to be assessed. With all the information they are receiving, it generally can and possibly does, raise more questions to be answered by the lender. This then delays the application process further before approval.
The impact of this is that you need to factor in this extra time the Banks will take to assess your loan before you can enter into a Contract to purchase your new property.