Securing a home loan could be a major obstacle for first-home buyers, despite experts tipping the group to drive Melbourne’s property market recovery.
Young people in coronavirus affected industries are being heavily scrutinised by big banks up until settlement, mortgage experts say, with wait times for pre-approval blowing out.
Mortgage Choice chief executive Susan Mitchell said those working in hospitality, tourism and retail should “expect to get more questions from the bank about (their) financial situation right up until the loan is settled”.
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Getting a home loan is getting harder for some. Picture: iStock
“Pre-approval isn’t an absolute guarantee and is subject to no adverse change in your financial situation,” Ms Mitchell said.
“The bank will look at your application again once you’ve found the property you want to buy.
“I would encourage anyone in an affected industry to ask for a fully assessed pre-approval before buying at auction so you have more peace of mind of your borrowing power.”
Carpenter Troy Hill, 28, said his pre-approval became void after coronavirus hit.
While he managed to “scrape through” and buy his first home in Kilsyth, being a sole trader made getting his loan approved a lot harder.
“It was basically just a game of cat and mouse, back and forth with the banks,” Mr Hill said.
“Banks were taking a long time to approve finance — I had to keep pushing for an extension. “This whole scenario has really impacted borrowing capacity, but I managed to still scrape through.”
Carpenter Troy Hill said he had to jump through a number of hurdles to get approval for a home loan. Picture: Mark Stewart
Home Loan Experts credit manager Sharon Xie said young people like Mr Hill were most frequently impacted by tighter lending restrictions.
“Young Australians are more affected as they are less experienced and may work in a more unstable environment,” Ms Xie said.
“Lenders may have tightened up certain policies. (But they are) are still willing to lend as long as your employment is continuing.
“In fact, the majority of lenders have announced they are willing to consider people who are on JobKeeper income.”
Banks are reported to have a bottleneck of loan applications. Picture: Ian Currie
It comes as property pundits tipped first-home buyers would lead the way in Melbourne’s coronavirus recovery.
Corelogic’s head of research Tim Lawless said first-home buyers eligible for government support would boost demand for affordable pockets and help drive the market out of the downturn.
Bank of Melbourne chief executive Mark Melvin confirmed JobKeeper payments were considered a type of income for home loan applications, and lending criteria had not changed for specific industries.
“We have made significant improvements to our home loan processing during COVID-19 and the majority of our applications are being processed within our standard turnaround times,” Mr Melvin said.
“Bank of Melbourne has also recently reduced lender’s mortgage insurance to just $1 for eligible first-home buyers.”
Buyer’s advocate Cate Bakos said some of her clients had experienced 40-day queues for assessment at the major banks.
Cate Bakos said some of her clients had experienced 40-day queues for assessment at the major banks. Picture: Mike Dugdale
Strategic Finance director and mortgage broker Mario Borg had also noticed wait times for loan assessment blow out to this length during the pandemic.
But he assured would-be borrowers banks “don’t want to stop lending, they want to make sure they’re lending to the right people”.
“There is a heightened level of scrutiny and compliance that started with the (banking) royal commission last year, then we got whacked with COVID-19, which has exacerbated it,” he said.
“(But) we’re finding the second-tier lenders are offering some very sharp deals right now.”
— with Jack Boronovskis, Samantha Landy
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