Applicants turn to specialist lenders amid COVID-19

Home loan applicants who work in industries particularly affected by the coronavirus pandemic are not being assessed based on their individual circumstances, according to a specialist lender.

The managing director of Sydney-based mortgage brokerage and lender Non Conforming Loans, Ray Ethell, said many borrowers have not been able to secure credit from traditional lenders due to the tightening of lending criteria in response to the economic impacts of COVID-19.

Furthermore, he said several lenders and mortgage insurers have placed an embargo on borrowers working in industries particularly hard hit by the COVID-19 impact, including the retail, aviation, hospitality, real estate and entertainment sectors.

“Applicants are not being assessed based on their individual circumstances,” Mr Ethell said.

“Some lenders have announced they will reduce acceptable income from commissions, overtime and bonuses to only 50 per cent of income. This is happening in some cases where there has been no change to the applicant’s take-home pay.

“Income from dividends is also no longer to be accepted for serviceability assessments by some lenders.”

Several lenders have applied changes to and tightened their lending policies in the wake of the impact of COVID-19, including Westpac, NAB and non-major banks such as Bankwest, ING, Gateway Bank, MyState Bank, Heritage Bank, Citi and a number of non-banks.

Mr Ethell also noted that casual and contractor applicants are not able to use their income for servicing with some lenders unless it is a secondary income with a salaried employee.

While rental income has been decreased to only 60 per cent of rental paid, the self-employed have had maximum loan-to-value ratio reduced to below 80 per cent and a reduction of 30 per cent of income for servicing for other lenders.

“It is important to speak with a specialist lender or an experienced mortgage broker that is up with all the policy changes and can guide you through the lending landscape to find a financial solution,” Mr Ethell said.

Non Conforming Loans has received a substantial increase in enquiry from rejected loan applicants due to the economic impact of COVID-19, according to Mr Ethell.

Enquiries through their website and referrers have increased by just over 50 per cent since the third week of April, Mr Ethell told Mortgage Business.

“These applicants who have been declined for a loan or by lender’s mortgage insurance due to policy change or their credit score have been turning to specialist lenders like Non Conforming Loans for a solution.”

[Related: Borrowers move to unfreeze loan repayments]

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.