Both ANZ and NAB are cutting back on risky lending
Two major banks have adjusted their debt-to-income (DTI) ratio limits to curb higher-risk lending, a report from The Sydney Morning Herald has revealed.
ANZ Bank said that it will be limiting loans to borrowers with DTI ratios of 7.5 and lower, while the National Australia Bank (NAB) has reduced its DTI ratio limit from nine to eight.
A spokesperson from ANZ told the Herald that the decision to adjust DTI limits came as a result of the bank’s regular review of its “lending appetite and policies,” characterising borrowers with higher DTI ratios as “more vulnerable to adverse changes in circumstances or loan conditions.” Similarly, executive Kirsten Piper said that NAB is following its “responsible lending obligations.”
“We are committed to lending responsibly and want to ensure customers are able to appropriately manage their repayments, both today and in the future,” Piper told the Herald. “To do this we work with all customers to understand their individual circumstances and assess applications based on a range of measures.”
A recent report from the Australian Prudential Regulation Authority (APRA) found that new lending with DTI ratios of over six times – which is what the regulator considers as the high limit – increased to 24.4% during the last quarter of 2021, up from 23.8% in the third quarter and 17.3% in 2020.
In late 2021, the regulator made calls for banks to “review their risk appetites,” later warning banks that it was considering imposing limits on higher-risk loans.
“The purpose of temporary lending limits would be to moderate any excessive growth in higher-risk lending during periods of heightened systemic risks,” said APRA chair Wyne Byres back in November 2021. “The specific calibration and start date for any limit would be advised by APRA at the time, taking into account the risk outlook.”
