Major bank lending changes to benefit borrowers

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The relaxation of the lending policies at Westpac, CBA and St George are expected to jumpstart property purchases by small and medium-sized enterprise (SME) owners.

All three banks lowered the requirement for SME borrowers to present two years’ worth of financial records as income verification, reducing this down to one year’s worth. Moreover, borrowers no longer need to present their tax returns.

Westpac and CBA also increased the lending capacity percentage for SME buyers to 90% (from the previous 80%) of the purchased property’s value.

Such initiatives are important because “in the past, banks have viewed the SME demographic as risky, despite many owners coming from strong corporate or trades backgrounds with a long successful working history in addition to strong equity in various investment classes,” said Joel Wyld, member of the Mortgage and Finance Association of Australia.

“Many SME owners have had to settle for low doc loans for a two year period which has deterred them from purchasing property.”

Wyld has also observed a trend in which property is utilised as a vehicle through which property trusts and partnerships are cemented.

“Both of these structures have a place in the market but care must be taken when assessing income of a business if multiple owners are involved. Legal advice is also advised to minimise issues in future years,” he advised.

With the simplification of the loan application process, all that’s left for self-employed borrowers to do is to adhere properly to the existing guidelines.

Wyld’s top tip is to ensure that one’s financial records are updated and accurate, because a mistake could make or break the application.

“The time is now ripe for SME owners to capitalise on the new lending rules to secure either a dream home or business premise,” he said.

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