Stricter lending rules have begun to curtail Canadian’s personal spending habits, as things like clothes, holidays and even take away food are becoming factors when a bank reviews a home loan application, according to Perth home builder Gemmill Homes.
“In the past, banks would work out a multiple of your income, less your big stuff like car debts and exposure to credit cards. Now, they’re looking at your bank statements to see how often you have takeaway food,” said Gemmill Homes Managing Director Craig Gemmill.
The problem with this, along with the heightened scrutiny into the banking industry, is that it deters buyers across the board — whether they are first, second or third home buyers.
Providing an explanation for the firmer implementation, Gemmill said that it first and foremost comes from the Australian Prudential Regulation Authority (APRA).
“APRA want increased security on the amount the banks are lending to home owners, so the balance has shifted. The banks haven’t changed their guidelines, but they are just applying them far more stringently now.”
That said, Aussies can always proactively react to this and make sure that they do not encounter any credit problems.
For instance, being prepared before applying for a loan and slightly adjusting their lifestyle in the months preceding a credit application can make a huge difference.
Gemmill said that it is essential to keep in mind that almost everything a person does is scrutinised. As such, minimising unnecessary spending prior the application could help. Notably, Uber Eats could have a significant impact on chances of approval so it is recommended that this be lessened.
Ensure that everything is organised before applying. Have as much as financial information as possible This way, one can also avoid problems that might come up during the credit check.
It is also worth noting that due to technology, people tend to use cards and every financial move can be tracked from there.
“If you’re a day late paying your credit card, if you overdraw your account, that is all reported and that affects your credit score,” Gemmill reminded.
