NAB has said that they will “start automatically rejecting customers who want to borrow a high multiple of their income and only pay interest on their home loan, amid concerns over the growing risks created by rising household indebtedness.
From this Saturday, the bank will decline any customer applying for an interest-only loan who has a high loan-to-income ratio – an approach that banking sources said was not used by other lenders in the mortgage market”, according to the SMH.
While NAB already calculates loan-to-income ratios when assessing loans, it has not previously used the metric to determine whether a customer gets a loan, and such a blanket approach is understood to be unusual in the industry.
We have maintained for some time that LTI is an important measure. It should be use more widely in Australia, as it is a better indicator of risk than LVR (especially in a rising market).
