Commonwealth Bank tightens home lending policy

Lending criteria requiring creditors to commit 20% deposit is part of improving credit quality.

Commonwealth Bank has moved to rein in some parts of its home lending business by tightening lending criteria for investment borrowers.

The bank has written to mortgage brokers advising them that loan to value ratios will be reduced to 80 percent from 90 percent on a range of investment home loans.

The tighter standards, which take effect on March 20, will make it harder for borrowers to obtain loans to fund home purchases for "personal investment" purposes.

Instead of having to stump up a cash deposit of 10 percent under the previous arrangements, borrowers affected by the new lending criteria will be required to commit a deposit of 20 percent.

The changes will make it harder for borrowers to get a mortgage product if they use it to build a new house with the sole intention of selling it when it is completed.

The changes will also make it harder for borrowers who use part of their home loan to fund a share portfolio or other personal investments.

CBA's head of retail banking, Ross McEwan, said the changes followed a comprehensive risk assessment of the bank's $270 billion home loan book.

View the full story in Herald Sun.