Australian Mortgage options slashed for foreign based buyers

Over the course of 6 months between March and September this year, all of Australia’s major lenders have drastically reduced or completely ceased lending to non-Australia residents.

The changes have affected both Australian citizens (expats) and non-citizens, and their dreams for owning property down-under, for the time-being.

Policy changes extend to foreign-currency income as well, regardless of where you are based, or reducing the amount of foreign-currency based income that can be included in loan applications.

It’s clear that banks have targeted foreign-currency income as high-risk, and they have been directed by the regulator, APRA, to tighten lending standards, reduce loans to investors, and increase their capital adequacy ratios (more on that in my next article).

As a result off-the-plan purchases by foreign investors have become significantly more risky. In April and May 2016 a dramatic decrease occurred in lenders providing finance for foreign buyers with approval from Australia’s FIRB to buy property in Australia.

The individual policies of the major banks and other lending providers vary from institution to institution, however the availability of capital has without a doubt, been severely constrained especially for foreign based, non-Australian citizens.

The tightening of lending standards that has occurred to both investors and home-buyers has reduced additional borrowing capacity significantly (meaning you would need up to 50% more income than before the changes, to qualify for the same loan, at many banks).

Increased stress testing on borrowers has meant that a significant number of purchasers of apartments ‘off the plan’ who were previously approved for a loan, are in very real danger of not qualifying for finance under the changing regulations and bank policies.

If you have purchased a property in Australia ‘off-the-plan’ and now need finance in Australia, contact me to discuss any options available to you.

Daniel Shillito

Aussie Finance and Property




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