Ombudsman offers advice on new LVR restrictions
Banking Ombudsman offers advice on new LVR restrictions and avoiding problems with loans
“The Reserve Bank’s new loan to value ratio (LVR) restrictions which come into force today are expected to lead to a further spike in mortgage-related issues, the highest single category of complaint for the Banking Ombudsman Scheme,” says Banking Ombudsman Deborah Battell.
To help bank customers understand how the LVR restrictions may affect home loan applications and how to avoid lending pitfalls, the Banking Ombudsman has released two new guides to help banking customers with lending decisions: Residential loan-to-value lending decisions and Concerns about lending decisions.
The guides follow the release last month of a guide on guaranteeing somebody else’s lending. The new restrictions are also expected to result in a rise in applications accompanied by personal guarantees, especially from family members guaranteeing loans for first home purchasers.
“We don’t know how many people will be affected by the LVR restrictions as each customer’s situation will be different, however the guides are designed to help customers avoid problems with new mortgage lending.”
“If customers do have problems we suggest they first contact their bank to try and resolve their individual situation. If they are still unhappy with what the bank proposes, they can contact the Banking Ombudsman Scheme. “
The decision to lend is usually a matter of the bank's commercial judgement so the Banking Ombudsman Scheme may not always be able to investigate as this is outside its terms of reference. However, the Scheme can investigate administrative errors in the lending application process. This includes complaints around refusing to lend and what is sometimes termed irresponsible lending.