Homeloans tightens interest only home loan applications

Homeloans tightens interest only home loan applications
Homeloans tightens interest only home loan applications

Non-bank lender Homeloans has introduced stricter measures using loan-to-income (LTI) ratios when determining credit decisions for interest-only home loan applications. 

Effective from last Saturday (8 July), interest-only applications are now either declined or referred depending on the income structure of clients with an LTI ratio of greater than eight.

LTI is calculated as the ratio of the total limit of the loan applied for against the client’s total gross annual income.

“Homeloans has access to multiple funding sources, and the use of the LTI in assisting with credit decisions is now a requirement of one of these funding sources.

"It should be noted that the use of an LTI will initially be limited to the assessment of loans where the borrower has elected for interest-only repayments, and will only apply to our Ultra Plus product range,” Homeloans said. 

Brokers can complete a manual calculation to determine what the LTI is for each client and are urged not to proceed with the application if the LTI is below the threshold of eight (unless the loan amount or gross annual income changes).

The Homeloans Ultra Plus Serviceability Calculator has been updated to reflect these new criteria. 

“We're committed to lending responsibly, and ensuring our customers can meet their home loan repayments today and into the future,” the lender wrote in a note to brokers.

“Regulatory bodies have raised concerns about Australia's household debt-to-income ratio, which has risen significantly over the past decade. 

“With this in mind, we're making changes to our home lending credit policy to better assess a customer's ability to service their home loan, and to assist Homeloans’ monitoring of risk settings.”

Australian Broker also advised Advantedge Financial Services will increase the interest rate on all new and existing variable rate interest only home loans by 0.35% p.a., effective Tuesday 8 August 2017.

The interest rate on all new fixed rate interest only home loans will increase by 0.35% p.a.

These changes apply to both owner occupier and residential investor home loans, across all of Advantedge’s white label partners.

Home Loans Interest Only


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