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The four big banks have initiated a tightening of policy on foreign borrowers wanting to borrow funds in Australia. The banks have tightened rules on the source of income, increased the size of deposits required and one bank has stated it will no longer permit any lending to a non-resident.

The decision was made after the Reserve Bank of Australia (RBA) raised concerns about the ‘significant and increasing’ role of Chinese investors in the Australian property market, which presented ‘indirect risks’ to the financial sector. A couple of the big four banks have also been exposed to significant volumes of fraudulent loans from overseas borrowers which has also led to the lenders policy reviews on foreign income.

Some banks will no longer accept mortgage applications when the borrower is a temporary Australian resident receiving foreign currency income. Other banks have reduced the maximum amount that it will lend non-citizens and permanent residents to 60 per cent of the property’s value.

The RBA hopes that the tightening of these regulations will reduce the number of overseas investors purchasing Australian property, which has led to a saturation of the market and made it even more difficult for Australian’s to purchase property.

If you would like further information regarding these changes, please speak to one of our mortgage brokers.