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By: Jessica Darnbrough
The Commonwealth Bank of Australia has announced its plans to reduce the loan to value ratio on some of its investment loans from 90 per cent to 80 per cent.
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A spokesperson for CBA told The Adviser that the tighter standards, which will take effect from Saturday 20 March, will only affect personal investment loans.
“Owner occupied home loans will be in no way affected by these changes,” the spokesperson said.
Under the proposed changes, the new maximum LVR will be 90 per cent, except where one of the loan purposes is personal investment, then the maximum LVR is 80 per cent. The same also applies to CBA's line of credit loans.
According to the spokesperson, the changes are part of CBA’s responsible lending strategy.
CBA's head of retail banking, Ross McEwan, told The Herald Sun that the changes followed a comprehensive risk assessment of the bank's $270 billion home loan book.
"The risk assessment showed that these were areas we needed to tighten in terms of credit quality," he said.
"We view this as about improving the credit quality of the book, rather than an effort to haul in home lending."
CBA’s announcement follows Westpac’s decision earlier this year to drop its top LVRs for new business from 97 per cent to 87 per cent.
A spokesperson for the major told The Adviser back in January that Westpac's decision to reduce its maximum LVR for new customers was consistent with its strategic focus on building stronger relationships with its pre-existing customers.
