No, Big Banks Won't Deny Home Loans Based On Funny Transfer Descriptions
Sending cash to your friends with labels like "drugs" or "sex" won't sink your chance of getting a home loan, the big banks say, refuting claims which surfaced this week.
A news story from a leading property website caused a stir in recent days, claiming that people applying for home loans may be impacted if transactions in bank account carry labels hinting at adult entertainment or other illicit activity.
It refers to a trend among young people where direct bank transfers -- such as paying a friend back for dinner or drinks -- are labelled with joke transaction descriptions. The original story quoted a number of mortgage brokers who advised against the trend, and the story was later regurgitated on a number of national pop culture and news sites.
However, spokespeople for all four 'big banks' -- ANZ, NAB, Westpac and Commonwealth -- flatly told 10 daily that they do not make decisions on whether to deny or approve a loan based on such frivolous transaction details.
The banks all declined requests to speak on the record about the flavour of the original story, but most said such factors did not form part of their lending criteria. One bank said they would not look at individual transactions in such detail, and in any case, would give applicants the opportunity to explain the transaction descriptions.
However, the banks did admit that other expenses -- such as takeaway food, taxi rides and subscription TV -- would be taken into account when denying or approving a loan.
"We assess every home loan application on a case-by-case basis and consider a number of factors including a customer’s income, living expenses and liabilities," a Commonwealth Bank spokesperson said.
"We are committed to meeting our responsible lending and regulatory obligations and have rigorous processes in place to monitor all relevant transactions when assessing a home loan application."
A bank spokesperson told 10 daily they would assess, among other factors, an applicant's total income versus expenses, as well as what percentage of their income they would spend on entertainment and other discretionary items.
Since bank lending practices were tightened in the wake of he Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, numerous stories have been reported in media of people claiming their loans were knocked back because they had spent too much money on Uber or shopping.
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Other applicants in the media report said they had been queried about regular subscription expenses like Netflix, gym membership or private health clubs.
Banks say they go through these regular payments to establish how much income a person has at their disposal, to ensure they can repay loans without getting into trouble.
"We recently updated our Group Credit Policies to enhance the way we capture customer living expenses, commitments, and verify documentation, with the number of our expense assessment categories captured for home loan applications changing from six to 13," a Westpac spokesperson told 10 daily.
"We recognise sometimes it can be difficult for customers to provide a complete picture of their expenses and the enhancement of our expense categories means our staff and brokers have the opportunity to prompt customers to remind them about particular regular expenses they may have forgotten.
For example, entertainment, pet insurance, gym membership fees and media streaming service costs etc."
As for sending your mate $20 and marking it as being for "drugs"? That probably won't be a problem.