Banks' lending policies 'threaten country towns'

RUIN: Vicki Morley stands outside her Lucky 7 supermarket and post office which she is struggling to sell in Wirrabara because, she says, of restrictive bank loan policies.
RUIN: Vicki Morley stands outside her Lucky 7 supermarket and post office which she is struggling to sell in Wirrabara because, she says, of restrictive bank loan policies.

Towns in the Flinders Ranges fear the death knell has been sounded on their futures.

Concerns have flared over tough requirements by big banks for up to 70 per cent deposits on loans for properties, including those for businesses and homes.

Two council leaders, a businesswoman and a church pastor have spoken out about how the criteria threatens the future of their towns. 

“It is going to ruin us. Who has that kind of money?” said Lucky 7 supermarket owner Vicki Morley, of Wirrabara.

She has been told that her business faces an uncertain future on the market because potential buyers are required to pay deposits of up to 70 percent on the loan covering the vendor price. “It means we have to close the shop, unfortunately. In the next few months we will make a decision,” she said.

Cr Morley is Deputy Mayor of the Mount Remarkable District Council which covers the town. The Mayor, Colin Nottle, said he thought he could speak for most mayors outside Adelaide who “bust a gut”  to encourage people and business into their areas. He said they would be “disappointed in our banks’ attitude relating to their recent  lending policies of requiring 30 then 50 and now 70 percent equity for prospective buyers”. “These policies are a huge impediment to country South Australia,” he said.

Orroroo-Carrieton District Council chairwoman Cr Kathie Bowman said local pastor Brian Cozens had told a public forum at a council meeting about two months ago that people were unable to take out housing loans in the same way as residents of bigger towns.

“Apparently borrowers for properties in every town with a population below 1500 are required to have 50 per cent or up to 70 per cent of the house price before big banks will lend them any money, not the 10 per cent you find in the city,” she said. “Pastor Cozens was quite anxious that we do something about it.

“All it does is give an advantage to bigger places such as Port Pirie, Port Augusta, Crystal Brook or Jamestown where it doesn’t apply – they grow, we shrink. Approval for loans should be based on capacity to pay. I find it discriminatory.”

One bank uses a system of “risk alerts” to denote properties where there is doubt over their eligibility for the issuing of loans to buyers.

Valuers are required to list the alert while assessing the properties for the National Australia Bank.

Staff who approve loans then face the challenge of having to find a way to overcome the shortcomings to issue a loan.

“Marketability” is a key criteria for the bank with distance from Port Pirie needing to be less than 20 kilometres and the area being less than 25 acres or less than five acres with no residence on the property.

The property must have power and water connected for the prospective buyer to be eligible for a loan.

Deposits of up to 30 per cent may be required if the property fails to comply with these conditions.

Otherwise, a normal home loan with a deposit of at least five percent can be negotiated. The problem for the banks is that if they foreclose on a loan, there is difficulty in some districts in selling the asset. Decisions on properties with “risk alerts” can be made by officers in Sydney, Melbourne or Brisbane.

The bank has tightened its lending criteria in the past few years. The Flinders News tried to contact the “big four” banks for comment, but faced difficulties because no head office phone numbers were available publicly.

Westpac, ANZ and NAB each indicated they had no policy requiring 70 per cent deposits, but said that decisions were made on a case-by-case basis.

A spokesman for Westpac, which also includes BankSA, said: “Each loan application made to Westpac is carefully considered on a case-by-case basis.”

An ANZ spokesman said cases needed to be assessed on their merits. “I am not saying your information is wrong … but we don’t have a blanket policy that says everyone in the Flinders has to have this for their individual lending in agribusiness and home loans,” he said.

A NAB spokeswoman said: “We consider a range of factors when assessing applications for loans. In particular, when it comes to providing loans for businesses and properties in rural and regional Australia, it is important we consider customers’ individual circumstances so we can provide the most suitable products and services.”