By lunchtime, ANZ had significantly bucked the trend of the flat broader market and was down around 3.7 per cent - however much of this was attributable to the stock going ex-dividend. Indeed it would be incorrect to assume the ANZ is the Robinson Crusoe of the banking world. The others have been working on similar changes to beef-up their home lending parameters. To date most of the focus has been on responsible lending and the banks’ use of the Household Expenditure Measure as a means to determine a borrower’s capacity to service a loan. During the royal commission much attention was devoted to whether this broad aggregated measure was sufficient to access individual customers, their spending patterns and their additional commitments. At ANZ the customer’s income will also be measured and assessed in a more forensic manner with enhanced attention to potential changes in borrowers' circumstances.

Loading In particular, it will more closely investigated the finances of those that will hit retirement during the course of the loan. Those within seven years of retirement will be asked to provide options on how they will be able to service the loan - such as asset sales, savings, downsizing or a partner’s income. Meanwhile, the inquiry into a borrower’s expenses will be particularly granular. It will go well beyond loan repayments and credit card expenses. Customers will be asked to itemise their outlays on everything from cosmetics and clothes, to childcare, gambling, alcohol, and pay-television subscriptions. The extent to which more emphasis on responsible lending will crimp banks’ ability to lend remains to be seen. Taking potential buyers out of the home market will certainly contribute in some way to the downward pressure on house prices.

With auction clearance rates around the nation sitting at between 40 and 50 per cent there is a clear prospect that the rate of decline will deteriorate. The most recent set of price markers, for the month of October, showed the annual decline across the national index was 3.5 per cent. CoreLogic said this signalled the weakest macro-housing market conditions since February 2012, with its home value index reporting a 0.5 per cent fall in dwelling values nationally in October and a fall in Sydney and Melbourne of 0.7 per cent in that month. This has taken the annual rate of decline in Sydney to 7.4 per cent and in Melbourne to 4.7 per cent. While the push to improve the lending framework is underway and won’t be reversed, the requirement for banks to undertake this work in order to adhere to laws on responsible lending will gain some clarity tomorrow (Tuesday) when some direction will be given around the test case undertaken by the regulator ASIC against Westpac. In a bizarre twist, an agreed settlement between in the two in which Westpac would pay $35 million for breaches of lending laws is now being questioned. Justice Nye Perram has the option of ratifying the settlement, increasing the damage payment due or throwing it out.

Loading Perram sought a legal opinion from an independent third party, also known as a friend of the court which in this case was former Commonwealth solicitor general, Justin Gleeson. But Gleeson shredded the corporate regulator's case that Westpac lent irresponsibly by using a benchmark rather than declared expenses when issuing home loans. If Perram follows the advice of Gleeson, the Australian Securities and Investments Commission will need to decide whether to litigate the case and attempt to establish a favourable precedent or chalk it up to experience. There will be plenty of bankers waiting to see how this one plays out on Tuesday.