Aussies on JobKeeper still getting mortgages
Cash-strapped Australians receiving government support payments are being approved by the banks for new mortgages, raising concerns it could leave them worse off.
Despite many people taking significant hits to their income during the COVID-19 pandemic, banks are still accepting and green lighting applicants who have suffered significant income losses.
Under the Federal Government's JobKeeper scheme more than 3.6 million people have been receiving $1500 a fortnight payments totalling $41.8 billion.
Financial Adviser Scott Haywood said it could leave Australians in a "dire financial position".
"For people on JobKeeper not everyone is going back to that job as it was before the pandemic," he said.
"For some people if they did apply for a home loan and were accepted they may not have a job to go back to then you can't pay back the loan."
Australia's unemployment rate is 7.5 per cent and is expected to climb into double-digits in the coming months.
Many banks including the largest lenders require customers to show proof they are on JobKeeper payments and in some instances show proof they are employed by providing a letter from their employer.
The loans also depend on which industry a person works in and the future job security they have.
Using a big four bank serviceability calculator, someone on JobKeeper could borrow around $250,000 for a home loan.
This assumes annual income of $39,000, monthly living expenses of $1400, interest rate of 2.79 per cent, 30-year loan, no other debts or credit cards.
Mortgage Choice broker Tim Leonard said many lenders had been "very supportive" of customers receiving JobKeeper payments and were approving loans.
"Each bank has its own policy requirements like letters from the employer regarding return to work dates and income but will only use the lower of the Job Keeper payment or the pre-COVID income," he said.
Financial Counselling Australia's chief executive officer Fiona Guthrie said "it's a case-by-case assessment" as to whether those on JobKeeper should be approved for a mortgage.
"It depends on the size of a loan and whether repayments are affordable"
"I think we should be worried about responsible lending after the Federal Court decision as it could lead to laxer lending standards."
Westpac was accused by the Australian Securities and Investments Commission (ASIC) of breaching responsible lending obligations on some interest-only mortgages, alleging borrowers' everyday living expenses had not been taken into account.
The Federal Court dismissed ASIC's claim, but consumer groups still want reforms to ensure more responsible lending.
Most banks who offer loans to customers on JobKeeper analyse a customer's salary pre-COVID and while on JobKeeper and if they approve the loan it's based on the lower of the two income streams.