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The major bank has announced that full income verification will be required from clients that wish to switch or refinance to an interest-only option.
As of 5 March 2018, ANZ will regard interest-only (IO) loan renewals as “credit critical events” which require full income verification as part of its measures to streamline the credit critical process.
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The requirements are set to apply to loan applications that involve changing from principal and interest (P&I) to IO, or extending an IO term.
Further, if serviceability is not evident, the loan will remain or revert to P&I.
ANZ will update process guides and renewal checklists to include the changes.
Moreover, customers will be notified by ANZ six months prior to the expiry of the IO period, and they will be informed of refinancing options available to them.
The bank noted that it is making the changes to further enhance its lending practices.
“We are making this change as part of our continual enhancements to our lending practices,” the bank said.
“Converting to or extending an interest-only period is a material change to original loan conditions, which could increase the total repayments over the life of the loan.”
Last year, the Australian Prudential Regulation Authority (APRA) imposed restrictions requiring banks to limit interest-only lending to 30 per cent of new loans.
[Related: Brokers should be ‘proactive’ in refinancing IO loans]
