Chief executive Shayne Elliot recently warned retail banking faces "strong headwinds with housing growth slowing and borrowing capacity reducing".

Mr Elliot also said a "disciplined" approach meant sacrificing short-term revenue growth and higher margins, particularly in the investor and interest-only segments of the housing market.

The bank recently announced that owner-occupier home loans grew by 6 per cent in the past 12 months but that overall net interest income had dipped by 2 per cent.

Among toughest

The planned changes are among the toughest to be introduced by the major lenders following the end of the east-coast real estate boom, particularly in Melbourne and Sydney, and introduction of the tougher macro-prudential controls.

At the height of the housing boom ANZ and Westpac, which has also cracked down on lending standards, approved "hundreds" of home loans backed by fraudulent Chinese income documents. Auction clearances have collapsed below 50 per cent, stoking fears the credit crunch will make things worse.

From November 25 the bank will be using new "comprehensive credit reporting" checks by having third-party agencies check on applicants' credit card, home, personal, or car loan debt.

It will enable the bank to cross-reference details in an application to discover whether other debts have not been listed on loan applications, undisclosed credit limits or amounts owing that are misrepresented.


In addition, mortgage brokers will be required to provide "enhanced verification" about applicants' income and rental expenses. This will include more details about changes to financial circumstances, including impending retirement.

More details will be asked for about living expenses and any other commitments.

Signs of hardship

This includes verified records of three months of rental payments, particularly where an investor will continue to rent a property.

Brokers will asked to look out for any signs of financial hardship, including late payments, overdrawn accounts, gambling and pay day lender transactions.

"It is also important to understand how customers are paid," the bank is telling brokers.

Detailed questions will be asked about overtime, bonuses, commissions and part time workers will be asked to provide salary credits from six months of continuous employment.

Older customers, such as downsizers, are also subject to tougher questioning about their capacity to service debt from the sale of the house, savings or income from other investments.