$2.8 billion in home loans given to people who can’t pay: APRA

Despite APRA asking the banks to tighten the screws on lending, almost $2.8 billion in home loans slipped through the big banks’ approval stages despite customers failing to meet their serviceability requirements.

News.com.au reported the latest data released by the Australian Prudential and Regulation Authority showing a surge in home loans given to people who had an inability to repay the loan.

Based on the average loan of $300,000 this equates to more than 9000 loans getting the tick of approval by lenders this way.

The Australian Bankers Association’s chief executive officer Steven Munchenberg confirmed the banks were working with the regulator on loan serviceability issues and more consistency in loan serviceability was needed

“APRA is working with all authorised deposit-taking institutions to create more consistency in monitoring of loans approved outside serviceability,’’ he said.

“Banks have comprehensive and rigorous processes to assess a person’s capacity to repay.

“How banks assess serviceability may vary a little across banks but what doesn’t change is that banks will only approve loans they think can be paid back.”

In August last year APRA’s chairman Wayne Byres said the spotlight would be put on lenders approving loans without meeting proper criteria:

“A close eye will need to kept on policy overrides — in other words, the extent to which lenders approve loans outside their standard policy parameters,’’