Mortgage advisers are still concerned about tightening lending criteria and strict servicing tests despite interest rates dropping to historic levels, according to a new survey.
The latest survey of independent economist Tony Alexander revealed a keen interest in the housing market, with a net 79% of advisers seeing more first-home buyers and a net 51% seeing more investors.
However, advisers are concerned about tight lending criteria and servicing tests, with 60% of the respondents saying that banks have “tightened up and are still assessing debt service ability at rates more than twice they are advertising.”
“Banks have yet to pass on the removal of LVRs (although one or two cracks are appearing just this past week), and they are requiring substantial proof of post-lockdown incomes. They are also actively discriminating against borrowers working in certain industries most heavily affected by the virus and border closure,” Alexander said, as reported by Landlords.
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Alexander said the tight lending criteria would most likely put pressure on house prices in the short term, which can be solved by loosening them up. However, banks might not loosen up their lending conditions if they cannot see proof of economic recovery.
“When might they get that confidence? Certainly not before the government can show that after we five million did our part to control COVID-19, that they are capable of doing their part and controlling the borders,” he said.
“If anything, the failures of the public servants in recent weeks have delayed our economic recovery and will have made banks even less willing to lend.”