ANZ has tightened trust lending to existing customers, with stricter ownership, guarantee and LVR requirements. (Source: AAP/Getty)
ANZ has joined Commonwealth Bank and Macquarie in tightening the screws on home loans to trusts and companies. Banks have been introducing new rules for home loan borrowers amid concerns over social media videos encouraging the creation of trusts and company structures as a way to access “unlimited loans”.
An ANZ spokesperson confirmed to Yahoo Finance the bank has changed its policy requirements for home loans in a company or trust name. The bank will now only lend to existing customers in this scenario, and the loan will be limited to a maximum 70 per cent loan-to-value ratio.
“We continuously review our credit policies and settings to ensure they remain appropriate and sustainable,” the spokesperson said.
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Borrowers will need to be one of the directors of the borrowing entity, provide a personal guarantee and hold a combined 25 per cent or greater ownership in the borrowing entity.
They’ll also need to have a “satisfactory” account history and have been with the bank for at least six months. The new rules came into effect on January 8.
ANZ’s move follows Macquarie Bank’s decision in October to stop lending to borrowers using trusts or companies altogether.
Commonwealth Bank also pumped the brakes on the type of lending in November, so only existing customers will be able to borrow in such a way.
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Lending to trusts has come under the spotlight due to a rise in videos on social media spruiking the method as a way to skirt serviceability requirements and access “unlimited” borrowings.
APRA, the banking regulator, requires banks to assess mortgage applicants on their ability to pay in the event interest rates rise by 3 per cent.
But, if you purchase under a trust or company structure, this serviceability buffer may be able to be circumvented.
Macquarie said it had received enquiries from customers wanting to borrow via a trust or company structure when it wasn’t actually suitable for them.
“Borrowing via a trust or company is a very small part of the market and of our home lending, but has recently become the focus of attention on some social media platforms,” a Macquarie Bank spokesperson told Yahoo Finance.
“The changes we’ve made are part of our ongoing focus on responsible lending, ensuring our customers only take on finance suitable to their individual circumstances.”
It also cited factors like rising application volumes and new anti-money laundering regulations coming into effect, which would require lenders to have additional verification for trust and company loans.
It comes ahead of APRA imposing restrictions on home loans from February 1 to limit the number of high-risk loans being issued to borrowers.
Under the changes, no more than 20 per cent of a bank’s new loans can have a debt-to-income ratio of six or more. For example, that would capture someone with an income of $100,000 who got a loan that made their total debts above $600,000.
This will apply for both investors and owner-occupiers.
“One of the key structural risks to system stability that APRA has long been concerned about is high household indebtedness,” APRA chair John Lonsdale said.
“Rising indebtedness has in the past often been associated with an increase in riskier lending and rapid growth in property prices.”
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