'Responsible' lending laws to be axed

The richer ones will always come first same as domestic tourists will start going

 

I see. I thought it would be quicker. Good to know.

 

I suspect the biggest change from this will be the 'easing' of HEM restrictions. Rather than a detailed budget for every borrower, we'll eventually go back to using some basic cost of living tables (which will likely still be HEM based). In my mind this has been one of the biggest road blocks to getting loans approved quickly.and easily. Personally I'll be quite happy to not have to go through every transaction statement figuring out how much people spend on botox and alcohol.

There will likely be a few lenders that change how they look at assessment rates, but many won't. Assessment rates weren't something that was created by responsible lending, they already existed with some lenders.

We might even start to see some logic where different lenders policies conflict with each other. Perhaps less double dipping on IP holding costs. Negative gearing might be assessed based on who it actually works. Accepting that some people actually do downgrade their home and pay off their debt when they retire.

Initially what this really means is less paperwork, more efficiencies and some improvement in borrowing power.

Over time though, some lenders will want to be more competitive and ease their policies further, which will further improve serviceability. Lenders will also be more willing to make exceptions where they can see reasonable arguments. Rather than requiring hard evidence of absolutely everything, they'll start to look at applications with a more common sense approach.

This isn't going to take as back to 2015 borrowing figures. It's probably going to have only negligible effect on those who only ever borrow for their own home. It is investors who will be the greatest beneficiaries of this. It might actually be possible to become financially independent within a decade or two, rather than a lifetime.


Before everyone starts calling their brokers asking what their borrowing power is, please keep in mind that these changes are proposed for second quarter next year. The implementation will take years to roll out.

 

Let's wait for the actual budget to come out, and then the legislation. But in the mean time, I have a whole bunch of equity sitting against offset to ensure I am ready if the market starts to heat up again

 

As always Pete the most well thought out and articulated response. This is exactly what I see happening as well.

The other thing I will add is I think a lot of lenders will reassess their auto assessment criteria. I think a lot more will actually assess applications and things like small defaults will make their way into every lenders policy as common sense assessment may prevail.
At the moment the assessors don’t have capacity as they are too busy asking for everyone of the Barefoots bucket accounts.

 

What could possibly go wrong?

 

Lenders have been restricted by onerous APRA and ASIC rules. ASIC got its butt whipped in court over the steak and wine matter with Westpac. Freidenberg seems to have revoked ASICs role in credit policy and lender regulation as it conflicts with APRAs. Duplicated policy isnt good. . I think it doesnt mean responsible lending laws are gone, just softer. Josh described it on TV as shifting accountability from the lender to the consumer for practical purposes. Of course consumer protection from lender disregard of consumers will need to be safeguarded. But it means lenders dont need to look at the $13 a month spent on PayPal and make it an inquisition. And card applications which seemed to be like applying for a 30 year mortgage may be morepractical and ...faster

My worry is lenders have all this data and systems to monitor data so they will still use it. Its not like they will stop.

 

Borrowers might actually have to take responsibility for the loans they sign off on?

You're right, there will be an increase in predatory lending, but a lot of checks and balances will remain in place. For example, brokers will remain subject to the 'best interest duty' legislation rolling out shortly. This legislation has far nastier implications for predatory brokers than responsible lending ever did.

 

I dont really understand how that makes a difference. Rich. Poor.... whatever. If there isnt a vaccine and the border isnt open, their wealth isnt relevant. The US is a rich country with lots of wealthy people... but they have high infection rates so they wont be allowed in. The Chinese have lots of big spending tourists, but they wont be allowed in either without a vaccine. Same for the Brits, the Irish, the French, the Germans, the Dutch, the Indonesians, the Indians etc...

 

Sure, but making borrowing easier during a recession, with record levels of household debt and unemployment seems a bit risky.

 

Peter, do you think would bank loosen up a little bit. even though the laws are changed.

 

I think we have to be careful about words like "easier". Does easier mean faster or less strict in this situation? We just don't know. This is a politician using carefully crafted language to promote an idea that we don't have any real detail around yet ....

 

I feel like I spend half of my life arguing to lenders why my clients are stating living expenses under HEM. Property investors are generally tight arses. The banks don't accept that reason. Going back to using HEM without evidence sounds good from the frugal perspective but i don't see it happening when the average one property punter spends way more than that these days. It will be hard for the powers that be to put a handbrake on heavy scrutiny. Watch this space I guess.

 

The Oz that cant come back from overseas because they cant afford first or business class tickets like the richer ones and just like the richer business or migrant people. I believe $$$ buys anything ... well almost everything

No vaccines needed as long as two weeks hotel quarantine should do the good job

 

Are you suggesting that we can open borders without a vaccine, and that 2 weeks self imposed /self policed quarantine will do the trick?

By the way, if they cant afford a plane ticket, not sure they will be buying property

 

Meanwhile, bank stocks up sharply today ...some > 5%. Guess the market think its good news.

 

I am sure you have read NCCP and BID from start to end.
So im interesting, if NCCP is abolished then from a brokers perspective does BID still capture all the requirements from NCCP anyway?

Or will you get a reprieve from things like living expense scrutinisation?

 

Yep fair enough. Also, if it lets me refinance my current loans to another lender I probably won't complain much.

 

Well, that is currently happening isnt it? It would help if one has a private jet or yatch

ABF has been doing well stopping those desperate and poor (illegal/legal) people going in but no issues if they are well off under so many categories ... well money does pay

 

Yeah... that argument is kinda lost on me ........I'm not sure Sir Alan Sugar or Tom and Rita Hanks being allowed to enter the country is going to drive up our resi property prices .