A stop to lending to foreign borrowers
There has been a concerning situation for the real estate markets, since banks have stopped lending money to foreign borrowers. Other lenders and brokers are advised to do the same and stop loans to this kind of borrowers because this could be a trigger for an economic downturn.
Changes to Lending
Why is this happening?
Recently, one of the largest banks in Australia, Bendigo and Adelaide Bank, told mortgage managers to stop lending to foreign borrowers. Moreover, this institute also warned them about the foreign-sourced income. All this is happening due to the growing worries about money laundering and fraud.
Bendigo and Adelaide Bank is investing a big spike in the loan applications of foreign borrowers and is concerned about a possible crackdown, because of the quality as well as the origin of the applicants.
This is not the only bank in Australia which worries about this aspect. In fact, both Westpac Banking Corp and ANZ Banking Group have discovered similar reasons of concern when it came to lending money to foreigners. They have approved a multitude of home loans for strangers, which were packed with Chinese income documents that proved to be fraudulent.
How can this situation be handled?
The banks are already trying to solve the problem. As it was already mentioned above, they are worried, but also cautious. Most of them have already stopped lending to foreign borrowers or have excluded foreign-sourced income from mortgage applications. For instance, because of these concerning problems, Westpac and ANZ announced that they have been forced to stop approving loans to foreigners last month. Furthermore, more than 30 mortgage managers have been advised to do the same by the Bendigo and Adelaide Bank.
Besides the said banks, Citigroup also evaluated the situation and decided to create a blacklist of foreign currencies that will no longer be accepted as payment for real estate. In Citi’s letter, there are mentioned only twelve accepted currencies, and the head of mortgage distribution warns that the others are not negotiable.
According to a spokesperson from Citi, who had confirmed the news, they will still provide healthy programs and residential loan book catering to foreign borrowers, but they excluded several currencies in order to make sure they do not attract unwanted loan applications. The spokesperson motivates this change as being a result of the recent industry concerns when it comes to this type of applications. The currencies that are on Citi’s blacklist include the Chinese RMB, Taiwan Dollar, Indian Rupee, Malaysian Ringgit, and Indonesian Rupiah.