More banks lending to properties in NRAS affordability scheme

Reports that the major banks are unwilling to finance loans for properties that qualify for the government’s national rental affordability scheme (NRAS) are exaggerated, according to specialist providers.

Paul Thewlis, managing director of Onyx, which sells, finances and provides legal services for properties that qualify for the NRAS scheme, says the information contained in a leaked building blacklist document are a “distortion”.

“This information is a year out of date,” he says.

The document leaked to the Fairfax press dates back to “late 2010” and highlights the major banks’ alleged reluctance to finance NRAS properties, with The Age reporting that “most other banks have also refused to finance investors or buyers for NRAS properties, apart from St George, which accepts borrowers for one project in Queensland”.

Charity group Mission Australia slammed the bank's purported reluctance to lend to purchasers of some NRAS buildings.

According to Thewlis, two of the major lenders – NAB and Westpac (including its subsidiaries RAMS and St George/Bank of Melbourne) – along with other financiers including Adelaide Bank, Firstmac and The Rock Building Society provide NRAS financing.

“In August last year, Westpac said no. Now they have the most extensive policy in relation to NRAS,” he says. 

In March this year, Westpac sent a note to mortgage brokers notifying them the bank was expanding the number of approved NRAS property management consortiums from one in Queensland to six, comprising three more in Queensland and two in Western Australia. 

Previously, the bank would only approve loans for properties managed by the Queensland Affordable Housing Consortium. 

“The banks are gradually getting on board with NRAS. The finance industry is conservative. They want to fund NRAS deals, but because they don’t know much about it they believe it’s something to worry about,” he says. 

Jo Brown from NRAS Real Estate based in Sydney agrees with Thewlis that the banks are getting on board with financing. 

She says the two banks that currently do not provided NRAS financing – ANZ and the Commonwealth Bank – are working on entering the space. 

“They don’t have NRAS policies yet, but they are working on them,” she says. 

Brown says buyers of NRAS properties are “normal investors” who seek properties with neutral or positive cash flow in good areas. 

“Tenants are meticulous and really treasure their properties. They are less work than normal tenants,” she says. 

Mortgage broker and realtor Tim O’Shea’s experience with the major banks on NRAS deals has not been as fruitful as Onyx or NRAS Real Estate. 

O’Shea, who is principal at the Da Vinci Property Group based in Runaway Bay, Queensland, says in his experience Westpac (and subsidiary brands RAMS and St George) is the only major bank to provide NRAS financing. 

A Westpac NRAS policy document dated September 2010 says the bank requires a 30% deposit from borrowers unless the loan comes with lenders mortgage insurance, which then raises the maximum loan-to-valuation to 87%. 

The bank does not take into account tax incentives associated with the NRAS when determining serviceability assessments. 

O’Shea says penalising NRAS borrowers with high deposit requirements makes no sense. 

“It’s a very backward approach. The chances of the property being vacant are nil given the discounted rents,” he says. 

O’Shea says his discussions with the Commonwealth Bank suggest it is keen to get involved in NRAS financing and is looking to develop a policy. 

A spokesperson for NAB confirmed the bank does “finance individuals to purchase properties built under the federal government's NRAS”. 

A spokesperson for ANZ says: "We currently do not finance investment properties built under the federal government's National Affordability Rental Scheme, but we’re currently looking at ways we can support government initiatives to house low-income earners."