The ANZ Group (ANZ) Group is preparing for a major reform of its method of evaluating and reviewing mortgage applications, including in-depth analysis of applicants’ income and expenditure and the introduction of an advanced credit investigation system.

According to a report in the Australian Financial Review, ANZ Bank staff and cooperative mortgage intermediaries have received relevant notices. That is, the latter should ask about the things that should be asked in the first interview with the loan applicant, the required financial documents, and the third-party verification changes scheduled to start on November 11.

ANZ Bank put forward additional requirements for 10 borrowing options including layoffs, senior employees working after retirement, and the use of retirement savings to repay loans.

Confidential documents distributed to bank staff and mortgage intermediaries show that ANZ is reforming its loan policy to ensure customers continue to do the right thing. ANZ Bank stated: “We know that to conduct responsible loans, we are obliged to conduct reasonable investigations into the clients’ applications and financial status, and take reasonable steps to verify the financial status”.

ANZ CEO Shayne Elliot also recently warned that retail lending banks are facing "the adverse effects of slower housing growth and reduced borrowing capacity."

Elliot also said that the bank’s “principled” approach means sacrificing short-term revenue growth and higher profits, especially in the part of investors and interest-only mortgages.

According to it, in the past 12 months, although ANZ Bank’s owner-occupied housing loans have increased by 6%, overall net interest income has fallen by 2%.

Credit standards are tightening

With the end of the East Coast real estate boom, especially Melbourne and Sydney, and the introduction of stricter macro-prudential supervision, major lending institutions have introduced the most stringent loan policies.

It was previously revealed that at the height of the housing boom, ANZ Bank and Westpac Bank approved "hundreds" of housing loans suspected of using forged income documents. Allegedly, these loans were obtained with the help of illegal mortgage intermediaries.

Starting from November 11, the bank will review the applicant’s credit card, housing, personal loan or auto loan debts through a third-party agency and create a new "comprehensive credit report." The report allows banks to cross-reference details in the application to find out whether other debts, undisclosed credit limits, or misrepresented amounts owed are not listed in the loan application.

In addition, mortgage intermediaries will be required to "enhance the verification" of the applicant's income and rental expenses. This will include more details about changes in the financial situation, and will also ask for more details about living expenses and other commitments. This includes the verification record of the 3-month rent payment, especially if the investor continues to lease the property.

In addition, loan brokerage agencies are required to pay attention to any signs of financial difficulties related to customers, including late payments, overdraft accounts, gambling, and payday loan transactions.

While major banks are tightening credit approvals for applicants, the auction clearance rate in the Australian housing market has been below 50% for the seventh consecutive week, indicating the continued weakness of the housing market. According to market analysts, the ANZ Bank’s actions may lead to further weakness in the Australian housing market.