St George Bank has loosened credit criteria across a range of its home
loan products over the last couple of weeks. Advisory bulletins
circulated to the bank’s mortgage brokers over the last two weeks show
that St George:

• Reduced the interest rate buffer on home loan calculations to 1.15% above the advertised standard variable rate, from 1.63%.

• Extended the reduced interest rate buffer of 1.15% to “low doc” and “essential” home loans.

• Reduced the interest rate buffer on fixed rate loans of between three
years and five years to 0.5% above the applicable fixed rate.

• Reduced what the bank calls the “commitment cover ratio,” or
serviceability ratio, to 1.05 times for loans that don’t require any
mortgage insurance; to 1.10 times where loans do require mortgage
insurance (and the borrower has a deposit of at least 10% of the value
of the property), and to 1.20 times where the borrower has a deposit of
less than 10%. St George left the serviceability ratio at 1.25 times
for “no deposit” home loans.

• Removed the requirement for genuine savings for “family pledge” home
loans, as long as the loan to valuation ratio is less than 80%.

• And for “no deposit” home loans, St George told brokers that the bank
would no longer require a letter of employment; would only require a
six-month history on personal loan statements for any current personal
loans and not for any recently paid out loans. St George said it would
also only require evidence of a history of rental payments extending
over three months rather than six months.

It sounds like St George is making these changes simply to catch up
with the criteria of some of its competitors, rather than leading the

Peter Fray

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