ANZ introduces stricter lending rules for foreign buyers

The ANZ Banking Group has closed the door on some foreign buyers wanting to invest in Australian real estate using overseas funds.

The bank insists on original copies of untranslated supporting documents required for a loan application and tightened passport scrutiny, such as foreign applicants having to provide all stamped pages. 

It comes amid concerns by property developers that a decline in bank lending to investors, capital controls imposed in China and confusion about state planning policies, particularly in Melbourne, might slow investments.

Mortgage brokers claim the moves are targeting the Chinese market, which has spent billions of dollars on Australian residential property, particularly in Melbourne and Sydney.

The bank will not accept loan applications based solely on foreign income.

"Applications based on 100 per cent foreign income will not be accepted," the bank has told mortgage brokers.

For borrowers seeking loans based on more than 50 per cent of foreign income, there are measures about the size and source of funding.

There is a maximum loan-to-value ratio of 70 per cent, no loans in a company name, no guarantor arrangements and restricted construction lending.

There are tough controls on refinancing of existing loans, which involves borrowers attempting to get better terms and conditions for their loans.

Foreign salary earner applicants must pass six stringent documentation tests that include providing comprehensive employment contracts, tax returns, current visa documentation and original, untranslated supporting documents.

The Australian Financial Review says that expatriate Australians working overseas will not be impacted by the lending restrictions but will be required to provide the extra documentation.