This week, Treasurer Josh Frydenburg, announced changes to lending rules designed to make it easier to get a loan.
Treasurer Frydenburg announced the removal of many Responsible Lending obligations that have forced banks to pore over loan applicants’ living expenses and then decline a loan because a would-be borrower was perceived to spend too much money on the gym or take away meals.
It is hoped that the changes will free-up lending as it allows lenders to rely on the information provided by borrowers, replacing the current practice of ‘lender beware’ which was making the banks overly-cautious in how much they would lend.
Many of these changes were generated after prompting from Reserve Bank Governor Philip Lowe, who said the pendulum had swung too far towards blaming banks for bad loans.
In setting out these changes, Treasurer Frydenburg said “By simplifying the loan application process for borrowers it will reduce barriers to switching between credit providers, encouraging consumers to seek out a better deal.”
While this is good news for borrowers, it does not mean that it will be open slather for finance – in fact, in these changes, the ‘shadow banks’ will be forced to follow the same standards as mainstream lenders.
Clients who Origin brokers previously financed with Liberty or Pepper, for example, may find it harder to get finance under these proposals.
And even without these changes, the banks are still lending. Reserve Bank figures below show that Australians can still borrow. Assuming the Treasurer’s changes make it through The Senate by March, there could be a further boost to borrowing.
To understand further what these lending changes could mean for you, please contact your Origin broker.