"If she (borrower) has to find more money, she'll spend less. What, she must spend that much (each month)?

"It's not that all of it goes on food. She also spends on stupid things too. If she needs more money she will spend less on other things, if she has to.

"All this is very dumb when you have a falling market...it's playing dumb."

House prices in Sydney have fallen 3.4 per cent in the past year and unit prices are down 1.4 per cent.

Harry Triguboff says tighter lending is adding to the softening market. James Brickwood

Instances of loose lending practices by the banks exposed at the royal commission has left investors nervous and triggered downgrades.

UBS last month told investors to sell Westpac shares after evidence presented to the royal commission showed a review of some of its mortgages had failed to meet income and expense assessments. It included 86 per cent of the loans examined being based on living expenses that were at or below the industry's HEM benchmarks.

Mr Triguboff says tighter lending was adding to the softening market, which was also being hurt by fewer Chinese buyers entering the market.


Meriton national sales director James Sialepis said there were instances of borrowers going to the same bank and branch but instead of being able to get a $1 million loan three months ago, it was now $750,000 to $800,000.

House prices in Sydney have fallen 3.4 per cent in the past year and unit prices are down 1.4 per cent. Glenn Hunt

"The way they are being assessed and services has completely changed," he said.

"Obviously the royal commission has had a huge impact on people being assessed."

Mr Sialepis said the banks "used to assess people on a fixed number of monthly expenses".

"Now, every single receipt needs to be looked at and the point Harry (Triguboff) makes is great. If I haven't bought a house and I have a disposable income and I have extra money in the pocket I'll go and spend that but once I get into a mortgage, that's it I made the sacrifices," he said.

UBS last month told investors to sell Westpac shares after evidence presented to the royal commission showed a review of some of its mortgages had failed to meet income and expense assessments. Michele Mossop

"There's no more going out, there's no more footy memberships, I need to start concentrating on paying that mortgage off and at the moment I think the banks are looking in the rear view mirror too much."


Mr Triguboff said the share price plunge suffered by the banks meant the banks were performing worse than speculative shares.

"That's bullshit. Suddenly ANZ doesn't know what it's doing? What rubbish."

The banking regulator was worried about risks to the housing market by over stretched borrowers last year, with the chairman of the Australian Prudential Regulation Authority Wayne Byres warning it was focusing on how lenders assessed living expenses and total indebtedness.