Australia and New Zealand Banking Group (ASX: ANZ) may have just made it tougher for you to get a loan.
According to a report in the Australian Financial Review the major ASX bank is looking to reduce its dependence on the household expenditure measure (HEM). It is joining its peers Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Commonwealth Bank of Australia (ASX: CBA) in making sure borrowers are creditworthy.
All of the big four ASX banks were criticised during the Hayne royal commission for using the HEM as a way to benchmark borrowers' outgoings, but some argued it was an inadequate measure because most people spent far more than the basics that the HEM showed.
The AFR report said that ANZ wants to cut the numbers of loans using HEM from over 70% to around 33% of mortgages written, based on what ANZ CEO Shayne Elliot has previously said.
From next week ANZ will utilise updated HEM tables to better reflect likely household expenditure. The AFR also reported ANZ will include net rental income with 5% of gross rental assigned for expenses – one would assume that would excludes the interest charged, which is usually the main cash expense of owning a property.
House prices have already been declining for a while. These moves made by the major ASX banks will likely make it a bit tougher to borrow as much as before. However, arguably, these measures should have been in place the whole time and therefore house prices wouldn't have gone up as much to begin with.
Foolish takeaway
The ANZ share price is down 0.3% at the time of writing. As long as Australian house prices keep falling I am not in the slightest bit interested in owning ASX bank shares because negative equity could be bad for bank bad debts and also means slower credit growth.
