ANZ Bank is asking some new customers to increase their home deposits to hedge the risks of a downturn before they approve a mortgage in some Australian suburbs, Mark Hand said, group executive of retail and commercial banking.
"It is not a blanket approach to the whole of Australia, but there are pockets where we won't lend beyond an 80 per cent LVR (loan to value ratio),” he said, according to the AFR.
“There are pockets that have certain property types – particularly at the top end of luxury properties – where we have more conservative appetite of sub-70 per cent (LVR) in some cases.”
The comments, reportedly made at the bank’s third annual environmental, social and corporate governance briefing on Monday, followed questioning on the effects of Melbourne’s prolonged lockdown on property prices.
They come after ANZ executives told a parliamentary committee on Friday that property prices are expected to drop by 10 to 15 per cent during the recession.
ANZ customers on a ‘mortgage holiday’
ANZ has 84,000 customers who have deferred their home loan repayments, as of July 2020, accounting for 9 per cent of its home loan portfolio.
Mr Hand said historically low interest rates would help struggling customers cope in the tough economic climate.
The bank could offer suitable customers the option of extending their loan term or converting to interest-only loans to help reduce their repayments.
“(We’ll give them) as much breathing room as we can to help them get back on their feet", he said.
Not all customers will be able to coast through the pandemic unscathed. Mr Hand said last month it may be in the best interest of some customers to downsize their homes.
"The growth that you might have anticipated (in your property) might not come, so at some stage you’re going to have to say: ‘If I can’t afford this mortgage, am I better off to rent, put my capital aside and wait until I’m in a better position to buy back into the market?’,” he said.
"I just think there are people who are going to have to make those decisions in the next few months."
The toll of a second outbreak
Victoria’s economic recovery has been delayed due to a second COVID-19 wave, causing it to fall behind other states and affect the nation’s economic bottom line, according to the Reserve Bank of Australia (RBA).
Melbourne recently became the capital city with the highest proportion of property vacancies in Australia after dethroning Sydney, driven largely by Victoria’s stage four restrictions coupled with a decrease in international students and visiting migrants.
But as its property woes worsen, other states appear to be recovering, with rebounds in both consumer and business confidence.
Banks are already checking in to see if half of all mortgage deferrals -- about 450,000 in September and October -- are ready to resume payments six months into the pandemic.
RBA Governor Philip Lowe said the economy’s recovery is contingent on its containment.
“We expect the (second) outbreak will reduce (Victoria’s) GDP growth in the September quarter by at least 2 percentage points,” he said, in an opening statement to a parliamentary committee last month.
“This will broadly offset the recovery that has been taking place in most other parts of the country.
“As a result, we are now not expecting a lift in economic growth until the December quarter.”