Banks confirm poverty line assessment for loans

Few borrowers would be able to pay back much of a loan with an income at the poverty line, but many banks are content to provide loans on the basis that their customers would be able to repay their loan while living at a standard equivalent to a poverty line income. Westpac said they adopted the Henderson poverty line measure into their assessment of credit cards, personal loans and mortgages in July. Bendigo Bank said it uses a loan servicing model that takes into account net disposable income, the number of children, living expenses, the consumer price index and the Henderson poverty indices. St George said it used at an expense-to-income ratio, a buffer for potential interest rates of just under two per cent, and the Henderson poverty line to assess loan serviceability. The Australian Prudential Regulation Authority said the use of poverty line measures in loan approval did not leave much for a family to live on, and was also untested for lenders across the economic cycle.