Australia and New Zealand Banking Group has recently announced that it is tightening its residential property lending over dubious offshore mortgage funding from Asia. The move comes as the bank noticed a significant surge in loan applications among foreign Australian residents with funding coming from overseas.
As reported by The Australian Financial Review, ANZ said it will no longer accept mortgage applications if 100 percent of income funding will come from overseas. The bank also tightened its lending criteria for foreign residents applying for a mortgage.
According to the report, funding usually comes from China, Hong Kong, Malaysia, Singapore and Indonesia and most of the time, the bank has no records of the companies indicated as the employers where applicants get their income. This "non-traditional" mortgage application is at risk of being used for money laundering, although the bank said it has found no evidence yet.
The new rules took effect on March 29, 2016, in which foreign applicants are now required to include their passport with all stamped pages, three-month pay slips, salary credits including a verified bank statements and employment contracts with contact details of the employers.
Meanwhile, Yahoo! Finance reported that a decrease in bank lending might cause investment in the country to slow down. This is in addition to China's control of cash outflow and the confusion on state planning policies.
But even as the banks tighten their lending criteria and increase their rates after banking regulator APRA expressed concerns over the rapid spike in investor housing loans, mortgage applications still saw increased numbers.
In February, bank house lending rose 4.1 percent to $11.9 billion, figures from the Bureau of Statistics showed. As reported by ABC, owner-occupied housing finance recorded 56,562 loans, a 1.5 percent increase month-on-month, while the average loan size for first-time homebuyers dropped to $327,500 between January and February.