Responsible Lending Laws Changes March 2021

Just after thoughts/opinions of what changes the government is likely to do when this gets reviewed over the next few weeks?

Do we need it completely scrapped or a hybrid of current requirements?

 

The responsible lending laws are well intentioned, but have been completely over regulated. They've been around roughly 10 years. Half that time they were workable, then ASIC and APRA decided to start working on them. It cumulated in the 'Wagu & Chiraz' case of ASIC vs Westpac.

The problem is the approach taken today almost assumes the lender is responsible if the borrower defaults. ASIC assumes the lender must have lend the borrower too much money.

The reality is most people default due to forces beyond their control, or because they're behaving badly. If people are defaulting now because Jobseeker is reducing, do you blame the bank for the pandemic?

I'd be very happy if Responsible Lending was replaced by, "Rational Lending". It'll make your next home loan application a lot quicker and easier.

 

what does it all mean in a nutshell??

If servicing criteria remains the same then it wont be helpful

 

That's what I'd like to know too.

Will it basically increase or decrease most folks serviceability?

 

I think there won't be any significant or immediate change in servicing critiera. Over time there might be some small incremental improvements. It's not going to allow people to borrow enough for another property or two overnight.

What many people don't realise is their borrowing capacity has been continuously erroded over the last few years. The only reason many people can qualify today is because rates are so low. If it weren't for low rates, borrowing capacity would only be about half what it was 6 years ago.

I think the main benefit is you won't be fornsically examined when applying for a loan. Ease up on some of the paperwork, faster loan approvals, easier lending to people who don't quite meet the pre-defined mould, but are otherwise a good risk.

 

Do you think the number of those people it benefits will be significant enough to have a material impact on growing the market even further in terms of increased percentage of growth over what we're seeing now? Or just continue to sustain current growth? Or no real impact?

Thks

 

@Sackie it's possible that the market will be affected by the perception of easier credit. This could push people to borrow more. I don't think the actual metrics will change in any immediate way.

One simple way to mitigate the rollback of Responsible Lending from adding fuel to the current boom would be to increase RBA rates by 0.15%. It wouldn't materially change anything for consumers, but it might make some people realise that rates don't always go down.