Amy-Louise Parsons was shopping with friends in Honey Birdette when her friend suggested that something called ‘Afterpay’ could soften the blow of her purchase.
“You can do this really cool thing where you can take it home now and you just have to pay $40 a fortnight over a few months,” the 28-year-old recalls her friend saying, and the shop assistant agreed.
Despite having the money in her bank account to pay for the underwear outright, she said the option of “paying for it slowly, rather than all at once” sounded “pretty cool”.
A few months later, when she applied for a $218,000 mortgage with the Commonwealth Bank, her broker brought up the fact that her Afterpay account had appeared on her statements.
“I had to cancel my Afterpay account and send her something saying that I’d paid it off and I closed my account. I actually had to physically cancel my account to get my mortgage,” the 28-year-old told 9Finance.
“My credit file was amazing other than that. I didn’t have a credit card or anything. I was really shocked about it.”
Today, the Australian Financial Review reported that Lauren Lane, 26, from Perth, had her mortgage application denied because of her Afterpay account.
Parsons’ mortgage broker, Terri Unwin from Smartline personal mortgage advisers, told 9Finance she’s seen a shift in the past six to eight months of banks going through statements with a fine-tooth comb.
Even if consumers have a small amount owing on an Afterpay account, it’s likely to be considered before a loan is agreed.
“Nowadays, we’re down to a deal serving by $5 or $10 surplus per month. So if it is really tight on servicing, those things like Afterpay can make a big difference on whether the deal goes through or doesn’t.”
While Afterpay does not identify as a credit service, Unwin says the banks see it as such.
“The banks now look on those facilities as almost an evergreen facility – that at anytime, you can redraw up to whatever your Afterpay [limit] is… So they all get included in your ongoing liabilities.”
It’s increasingly common now, as in Parsons’ case, for lenders to request three months’ worth of bank statements as part of an application.
“The expectation is that almost every bank will go down that path,” she said.
Jess D’Arcy found applying for a home loan in rural New South Wales harder than she expected, despite being pre-existing owners looking to re-purchase.
“We did not think our expenditures would implicate the loan process,” the 29-year-old said. “We had assumed that the $390 per week rent and our other home’s mortgage repayments of $547 a fortnight – paying them for the past two months – would show that we could afford a mortgage repayments of $370 per week for the property we were interested in.”
The couple sat down and realised they were spending $600 on general expenses per week, which, considering their income, impacted their ability to borrow.
The AFR cited the case of another woman named Georgina Emanuel was knocked back from her mortgage for having too many Uber rides and Uber eats charges.
While Unwin has not personally seen a client knocked back because of these expenses, she was not surprised.
“Obviously if you do have lots of Uber eats and those kind of things on your statement, they’re going to be used to build up a profile of the kind of spender or saver you are.”
Unwin stresses that these decisions are made on a case by case basis. However, she said, “Nowadays, when it’s tougher to get finance, every little bit helps.”
A spokesperson for Afterpay told 9Finance, “The lending practices of the banks are under more scrutiny than ever before and that means they’re now looking into day to day expenses more than ever before.
“Afterpay promotes responsible use, we set low spending limits, and we encourage positive repayment behaviour.
“We know we’re not for everyone, but we also know we’re a much better option than a credit card which is a product the banks making these decisions push.”
In a recent review of the ‘buy now, pay later’ industry, ASIC found that 60 per cent of users were aged 18-34.