Banking

The days of banks hosing money at anyone who walked in the door are long gone. Lending criteria has been tightened and you need to seriously woo your bank manager if you want a loan.

It’s a return to the days where you have to convince the bank manager that you can repay the loan and you’ll be a good customer. No more low-doc loans lying about your income, no more hiding the children and the credit cards.

Banks are now fixated on their “Capacity Test” and a customer’s ability to tick all the requirements.

Not only do new borrowers need to be aware of the change in rules but existing borrowers need to be wary of refinancing because they may not be able to borrow as much as they did in the past. It may be easier to stick with your existing lender rather than risk being knocked back under new rules.

One bank manager said to us long standing good customers have to furnish everything from Foxtel statements to tax returns in order to secure a new line of credit.

“It’s embarrassing but bank credit departments have all the power.”

In the new banking world the general rule of thumb is an average single income coupled with a credit card will be able to borrow four times their gross income. Most banks, for example, will now lend up to 80-85 per cent of the value of a property but they’ll expect a 10-15 per cent deposit.