COVID-19 pandemic is not the best time for home loan refinancing

The National Australia Bank will not take into account past income from holiday rentals, Airbnb and individual room rentals when considering income on home loan applications because of COVID-19.

The banning comes amid huge disruption in the short-term lease industry, Nine Entertainment's AFR reported.

For other properties NAB is increasing "rental shading."

Its reduced assessment of a borrower's capacity to service a loan, has been increased from 20 to 30 per cent to "cover increased uncertainty related to both new and existing rental payments, potential exposed vacancy periods and reduced rental income", according to the bank.

The NAB decision has also hit existing borrowers seeking to refinance to take advantage of lower interest rates and recent special offers.

Refinancing accounts for about 70 per cent of mortgage applications, more than double the rate in recent years, according to analytics from AlphaBeta, which is part of Accenture and the illion credit bureau.

Nine Entertainment has reported last month NAB began "coaching" mortgage brokers to quiz customers about the impact of COVID-19 on their personal and business income and how to detect whether they are receiving JobKeeper payments.

Six question to elicit more detailed responses from existing home loan borrowers about the pandemic are being asked, including whether they are requesting and or receiving any support, such as a repayment pause or holiday.

Other major lenders, such as Westpac Group, recently tightened credit policies for professionals and the self-employed.

Amid warnings that the impact of COVID-19 on customers "remain highly uncertain," Westpac, Bank of Melbourne, St George Bank and BankSA will also be withdrawing the lenders' mortgage insurance (LMI) waiver for accountants, lawyers, engineers, sports professionals and the entertainment sector.

The waiver is still available for medical professionals.

However the maximum loan-to-value ratio has been reduced from 90 per cent to 85 per cent.

"We are introducing the changes to reflect recent changes to the global and domestic economic outlook as a result of the pandemic," the bank said.

PAYG (Pay As You Go) and casual employees will now require payslips no older than 14 days.

There will also be closer checks to verify payslips.

Self-employed customers will be asked to provide Business Activity Statements (BAS) no older than the last quarter. 

Some banks have announced non-inspection valuations where a physical inspection cannot take place because of virus concerns.

Valuers are required to "undertake all practical measures" to confirm the external and internal details of the property in the absence of an inspection.

Banks have also introduced virtual signing of loan documents.

Earlier this year the major lenders were rolling out offers to attract new lending or refinancingfor the start of the year's sales.

NAB was offering a $2000 new lending cash bonus and $4000 refinance cash bonus.

Westpac Bank had a $2000 cash back.

ANZ's refinancing cash backs had previously ranged from $1200 for loans between $150,000 and $250,000 and $3500 for loans of $700,000 or more.