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The major bank has revealed it plans to make lending changes this quarter to support customers buying prefabricated homes.
In a move aimed at supporting the prefabricated construction industry, the Commonwealth Bank of Australia (CBA) has announced it will become the first bank to join prefabAUS, a body for Australia’s off-site construction industry.
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The major bank has also revealed that it plans to introduce policy changes designed to improve access to finance for customers purchasing a prefabricated home later this quarter.
Under the new policy, customers will be able to access progress payments prior to the property being affixed to land (up to 60 per cent of the total contract price), rather than customers having to fund up to 90 per cent of the upfront costs, which has previously been the case.
Customers who use a CBA-accredited prefab manufacturer to construct their property will be able to access progress payments up to 80 per cent of the contract price, the lender said.
The big four bank confirmed to The Adviser that the lending policy changes for prospective customers will be available through the broker channel.
Standard form contracts for MMCs
The lender has also agreed to sponsor the development of a standard form contract for modern methods of construction (MMC) to help support home buyers and manufacturers.
Standard form contracts for traditional on-site construction are widely available and accepted by banks, allowing home buyers to enter into an agreement and start dwelling construction on-site with bank finance.
However, this refined process does not yet exist for prefabricated construction where homes are built off-site.
“While prefabricated homes are a great housing option for many Australians, they have been historically challenging to finance, with customers needing to cover much of the upfront costs,” said Michael Baumann, CBA’s executive general manager, home buying.
“We want to alleviate some of the financial barriers associated with prefabricated properties. We believe these upcoming changes will help to achieve just that, giving more Australians the chance to look at this way of building a home, which could, in turn, help deliver more supply to market faster.”
Damien Crough, founding director of prefabAUS, said working with CBA would help solidify the trade body’s role in addressing the national housing shortage.
“With support from CBA, prefabAUS will tackle some of the challenges facing our members and their clients. We are excited to unlock the potential of off-site construction to address one of the nation’s most critical challenges – providing access to high-quality housing at pace,” he said.
“Utilising prefabrication, a house constructed in a controlled factory environment is built in 10 to 12 weeks, compared to around 18-plus months through conventional building.”
[Related: CBA announces new GM of third-party banking]
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