Borrowers now have better access to mortgage credit, as banks loosen the tight lending standards of the past few years. But credit availability varies widely from lender to lender.
Macquarie Securities’ latest mortgage shadow shopping exercise and broker survey found that credit availability has improved for owner occupiers and remained stable for investors in recent months.
Macquarie estimates that the impact of tighter lending standards reduced credit availability by up to 30 per cent from the peak in 2015.
Changes to APRA mortgage underwriting standards in May and falling interest rates in recent months have contributed to an increase of credit availability of around 9 per cent since May. However, it is still 5 per cent below the level it was 12 months ago.
Macquarie conducted the shadow shop with the following assumptions: an annual salary of $105,000 excluding superannuation, rental costs of $1300 per month, living expenses of $1200 per month, no personal loans or leases and a credit card limit of $11,000.
The shopper was single, had no dependants and was a first home buyer or an investor.
The owner occupier shopper was offered $699,000 by NAB, $695,000 by Commonwealth Bank, $669,000 by Westpac and only $561,000 loan by ANZ. The average of lenders surveyed was $651,000.
The average loan-to-income (LTI) multiple was 6.2 times. ANZ’s LTI was the lowest at 5.3 times and NAB’s the highest at 6.7 times.
The report says: “We found that NAB had the most substantial increase in credit availability, and its maximum capacity is now broadly consistent with CBA, St George and Bankwest.”
Investors and families with dependants were most affected by tighter credit availability, while families with no dependants were least affected.
Credit availability for investor loans decreased by 1 per cent compared to last year and the shadow shoppers were offered $889,000 by Westpac, $840,000 by NAB, $780,000 by Commonwealth Bank and $613,000 from ANZ. The average on offer was $790,000.
The average LTI was 7.5 times. ANZ’s LTI was the lowest at 6 times and Westpac’s the highest at 8.4 times.
ANZ’s conservative credit assessment process, wait time and inconsistent underwriting impacted its performance.
Despite this, Macquarie believes that ANZ’s normalisation in credit limits will result in stronger growth in time.
Mortgage brokers rated ING and Bankwest as being consistently competitive in their offerings compared to the big four, which were classified as the least competitive.
Macquarie says: “We also expect the majors to continue to shed market share. As our mortgage broker survey highlighted, the majors have less competitive pricing, more focus on expense verification and take longer to approve applications which are impacting their growth.”
Bank of Queensland and Suncorp had the longest mortgage approval wait time with an average of 19-20 days.