ING will be tightening its lending criteria for Aussies with high risk jobs looking to take out a home loan.
Any new applications submitted by casual, contractor or self-employed borrowers after April 15 will be subject to harsher serviceability restrictions, the lender said this week.
These changes will spare some industries most impacted by COVID-19, but others will need to meet much firmer rules.
But while it might be a sticky time for certain borrowers looking to purchase their first home, Mozo’s Property Expert, Steve Jovcevski says those who qualify shouldn't rule it out.
“If you have a stable income and your job is secure, it is absolutely a great time to buy for the first time in years. If prices drop in the future and you come across someone who’s really desperate to sell, you could snag a serious bargain,” he said.
ING’s changes for self-employed borrowers include:
- Income from applicants in industries most impacted by the COVID-19 outbreak, such as hospitality, tourism and retail will not be included in serviceability assessments
- Cash out is not available
- Business activity statements for periods ending in March 31 2020 will need to “demonstrate alignment of current revenue to the most recent financial years.”
The changes for contractor and casual borrowers are:
- Owner-occupier home loan applicants that only have casual or contractor income will not be considered, however it may be considered a secondary income if the application also contains a salaried employee
- Casual or contractor income will not be assessed for investor mortgage applications.
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It’s hoped the credit policy changes will help the bank lend more responsibly.
“We believe these adjustments are appropriate, given the current circumstances and acknowledge the resultant disruption to the incomes of so many Australians,” ING told brokers.
“These measures have been taken to ensure ING doesn’t place borrowers into positions likely to result in loan default due to circumstances beyond their control.”
Other restrictions the bank has put in place are around rental income verification. Applicants will now be required to provide proof of rental payment from the previous 30 days.
Finally, any bonus or overtime income and commissions will now be assessed at 50%, however borrowers in essential service industries are excused from this measure.
Other lenders who have made similar adjustments to their lending criteria in the last few weeks include Gateway Bank, MyState Bank, Heritage Bank and ME.
While in early April, insurer QBE announced it would suspend offering Lender Mortgage Insurance (LMI) for borrowers financially affected by COVID-19.
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If you are in a financially secure position and are ready to buy your first home, get started by heading over to our home loan comparison tool or by checking out some current offers below.