Claim banks' rules relaxed
Mortgage adviser Darren Pratley, formerly of TNP, said the change had been noticeable over the past four or five years. Where banks would previously have been most comfortable with loans about three times the borrowers’ income, they were now looking up to five times.
He said that was probably driven by lower interest rates but those rates could not be relied on to continue.
“They’ll have to carry that debt for 25 years. Incomes haven’t gone ahead that much but the tolerance around servicing seems to have loosened. If that is the case then technically the banks are putting borrowers in a very difficult situation.”
Banks were not taking much risk because prices were still going up and LVR restrictions meant fewer borrowers coming into the market with small deposits, he said.
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