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The major bank has reduced its loan-to-income (LTI) ratio in response to regulatory concerns about Australia’s high level of household indebtedness.
Last year, NAB introduced an LTI ratio calculation of 8 for all home loan applications. As of 16 February, this has now been reduced to 7.
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“NAB is committed to lending responsibly and ensuring our customers can meet their home loan repayments today and into the future,” the bank said.
“Regulatory bodies have raised concerns about Australia’s household debt-to-income ratio, which has risen significantly over the past decade.”
In the UK, where LTI calculations are the norm, the Bank of England first introduced limits on high LTI mortgages in 2014. These measures meant that no more than 15 per cent of mortgages issued should exceed a loan-to-income ratio of 4.5. The actions were not reactive and few British lenders were impacted by the curbs.
The UK’s 4.5 LTI cap on 85 per cent of new lending is still in place. In June last year, Bank of England governor Mark Carney announced that the 4.5 ratio “insurance measures” will become “structural features of the UK housing market”.
