The National Australia Bank (NAB) has listed more than 80 restricted postcodes across the country where its lending will be capped to a lower percentage of a property’s purchase price.
The bank believes there is a rising risk in the mortgage market and these ‘restricted postcodes’ have been identified as having a ‘significant deterioration in credit risk’.
The 40 highest at-risk postcodes are all located in mining areas of Western Australia and Queensland, while, perhaps most concerning, the other 40 restricted postcodes include the CBD areas of Brisbane, Perth, Adelaide, Melbourne and Sydney.
“One of the things that we definitely factor in is where there is actually higher unemployment, or a risk of higher unemployment, given the reliance on single industries for a town or region. We will also look very closely at areas that have had very dramatic increases in property values to consider what is the right ongoing LVR ratio as well,” said NAB chief risk officer David Gall.
Read more from The Sydney Morning Herald.
There’s a fine line between having strong business practices and discriminating against customers because of the postcode in which they live and the statistics gleaned from the surrounding area. In this instance, I feel that the NAB is well within its rights to implement higher lending standards in the housing market for areas most at risk.
As we know, many banks around the world were caught out with their lending practices, which resulted in the global financial crisis (GFC), so, as a result, the regulations around lending have needed to become a lot stricter. NAB is not only implementing these restrictions to protect itself from a market fall, but also to protect its customers from the volatility of the housing market.
The people that will be most affected by release of these ‘restricted postcodes’ will be those looking to sell houses in these areas, with greater restrictions limiting the number of buyers who can afford to cough up the extra 10–20 per cent deposit.
Is the release of the NAB’s lending restrictions a warning of housing market issues or simply good banking? Do you agree with the NAB’s approach to profile customers by postcode instead of on an individual basis?