Policy tightening during coronavirus.

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With the uncertainty created by coronavirus, lenders have responded by considerably tightening loan  eligibility requirements. Loan eligibility, although never a simple matter was relatively straightforward just a few short  months ago.

Each lender’s response has been slightly different. However, there are some common themes running around the tightened lending criteria. These essentially revolve around occupation type, assessable income and loan to value ratios (LVR).

The driver behind setting lending policy is always risk. It follows therefore, that occupations that are now considered to be in high risk categories are going to be viewed differently to those deemed to be in essential services. Accordingly, people whose income could be viewed as unstable will find it difficult to get loan applications approved. This would include casual and contract workers as well as workers reliant upon commission, overtime and bonus income. Workers in receipt of Jobkeeper payments will also find it difficult to gain approval as lenders need to assess the future reliability of the income source.

Similarly rental income is now viewed a lot more critically as the rental market environment has become much more volatile and uncertain. If you are reliant upon rental income to gain approval it may help to take out landlords insurance to guard against loss of rental income.

The uncertainty around the property market in general has led to high LVR loan applications being viewed with more rigour. This rigour is due to a general expectation within both the financial and property markets for property prices to fall in the short to medium term. Loan applications with loan to value ratios in excess of 90% will most likely be denied by most lenders at this time.

Lending policy changes constantly in response to market conditions and government initiatives. Banks and finance companies have stressed that the tightening of assessment requirements is temporary and only in response to the current situation and the resultant uncertainty at this time.

If you are looking for assistance with a loan application at this time please contact the team at Australian Finance Hub.

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