With banks under greater regulatory focus as to whom and how much they lend as a result of the Royal commission, the willingness of banks to lend money, particularly to first home owners, has become much stricter and more onerous.
Banks are not only reviewing the deposit or equity available more closely, but are now taking a deep dive into borrowers' credit records, including spending limits, PayPal, AfterPay debts, personal loans and discretionary spending such as NetFlix, UberEats, TabCorp accounts, Dan Murphy’s accounts and gym memberships.
Banks are analysing credit card and transaction account statements as a result of the responsible lending breaches exposed by the commission and matching this to living expense summaries detailed in the application. This is to identify any recurring transactions, regardless of the amount or nature in order to determine if the borrower can meet the loan repayments, both now and with a potential increase to interest rates in the future.
This is the latest move by lenders to increase scrutiny of borrowers' income and spending habits to improve their borrowing standards, this involves more documentation, computerised checks of transaction history and third-party credit checks for outstanding debts.
Overall, it is important for first time borrowers to be aware that all recurring expenses may likely be scrutinised by the banks. It can therefore be worthwhile talking to a mortgage broker in advance with a summary of your expenses a couple of months ahead of wanting to apply for any loans in order to identify any transactions that may be flagged, and have time to address these. You can also speak to one of the advisers at Altitude regarding budgeting and cashflow advice or referrals for a mortgage broker.
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