Punished by postcode?

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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.

Opinion: Responsible lending or discrimination?

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?

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Written by Drew

Starting out as a week of work experience in 2005 while studying his Bachelor of Business at Swinburne University, Drew has never left his post and has been with the company ever since, working on the websites digital needs. Drew has a passion for all things technology which is only rivalled for his love of all things sport (watching, not playing).
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38 Comments

Total Comments: 38
  1. 0
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    Any restriction postcodes in Tasmania by NAB. Is this another time Tasmania has been left of map?

  2. 0
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    Postcodes have always been a contentious issue, and the biggest reason has been the “toff” element – people wanting to be judged by the area in which they live, and not by the person who they are.

  3. 0
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    A bank is a business. It has shareholders; many of whom are superannuation funds. It is there to make a profit. If people are defaulting at a higher rate on their mortgages in certain areas then it makes commonsense to have higher lending standards in those particular suburbs.

  4. 0
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    Well, they can do what they like – after all it’s their money. Ha, Ha.

  5. 0
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    Sound management; a feature of the bank i am so satisfied to have done business with over many years.

  6. 0
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    Insurance Companys do this.. And if you live in an area of that postcode where there is little or no crime you pay the penalty of higher insurance… This postcard area garbage is absolute discrimination.. It will cut out the first home buyers and anyone who has had things a bit hard but still have a good credit rating.. BUT most of all it’s all about more less risk and greater earnings for the greedy banks..Tj.

  7. 0
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    It doesn’t matter whether we agree or not. The Bank’s run this country and do as they please.

    Insurance companies are another lot of robber barons who use post codes to fleece the general public.

    My house and contents insurance fell due a little while ago with a premium of $1895.00. This was with a company who claim to look after Queenslanders and are a club. But because I live in a certain post code they wanted an extra $1000 despite the fact I have never claimed on my policy.

    I went on line and bought the same insurance for $810.00.

    The federal government should have regulators for the banks and insurance companies. They bleed the public dry and make billions of dollars profits off the backs of the working people.

    And weak governments encourage it.

    • 0
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      if you get on line and look and insurance company reviews they are all out to take your money but impossible to have a claim paid not one of them has any possible reviews

    • 0
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      Gee, ‘The Government’ deregulated a lot of businesses a few years ago, and now is realising the mistake of their ways. Deregulation does not work. Man is a greedy animal, and needs boundaries.

  8. 0
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    Whilst the decision on lending is of course the bank’s, there are many instances of the use of post codes to manipulate not just the property market but as some have alluded to, insurance as well.
    I have used a credit union for decades and not been subject to many of the problems others have had with major banks; I obtained a mortgage well below the banks lending rates some years ago, my vehicle finance was points under the banks. Banking is swings and roundabouts; the day to day banking customer pays the banks operating fees and service to this type of customer is basic – reduce costs. Foreclosing on day to day customers is easy for banks and quite profitable as often properties can be moved on at reduced costs to major investors.
    Shop, shop, shop for all finances; housing, insurance, personal loans and small business and don’t go into any contract with a major bank without having a full understanding of your rights , even if you have to pay someone to do this for you.

  9. 0
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    Well there is your answer Gee Whiz, & the others. Go on line & find a provider that suits you better.

    I similarly found some insurance companies over the top with home insurance. One boasts that they include flood insurance all policies. Well that’s great if you live low down beside a river, but of no interest to me, living high on the hill. I am not interested in subsidising those with higher risk, because of their own choice or lack of careful investigation.

    Likewise when I used “compare” for insurance quotes, I found my company offering me insurance on line for $140 less than they had offered me a renewal price. They had better be more careful offering cheaper insurance to get new business. If I find it, I will claim it, or go elsewhere.

    Meanwhile, if banks don’t want risky business, why should they take it.

    • 0
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      As I said I saved over $1000 by shopping around. Like you my property is on high dry land and will never flood. But the insurance company still insisted I pay for flood cover. What a rip off.

    • 0
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      Yes that is the way forward Hasbeen. Ideally a broad sweep of indicators would determine lending decisions, I am sure postcodes are just one part but if a major part they would be an indicator of extreme laziness on any bank’s part. Eventually that sort of laziness would lead to demise and the way to hasten that is to shop around.

  10. 0
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    In some ways it is a bit of a cop out by the bank in that they are taking an easy path instead of assessing each case individually, as they used to do many years ago.
    However insurance companies do it with house and car insurance so I guess we will be stuck with it as the banks have so much clout with the powers that be they will not be restricted by them.

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