Reforms announced by the Federal Government that will streamline and loosen the progress of applying for home loans are intended to jumpstart our flagging economy.
“As Australia continues to recover from the COVID-19 pandemic, it is more important than ever that there are no unnecessary barriers to the flow of credit to households and small businesses,” Josh Frydenberg wrote in The Australian.
“It is now not uncommon for a person applying for a mortgage to be asked to explain individual discretionary spending and provide verification of a customer’s Netflix and Spotify subscriptions, UberEats or MenuLog usage or other detailed information,” he continued.
“All in order for the lender to be confident that it cannot be held liable in the event the borrower cannot repay the loan.”
Mr Frydenberg writes the new framework will “remove the overlap and ambiguity for consumers and move away from the one-size-fits-all approach” to enable “the vast majority of Australians” to benefit from access to credit.
“It will restore balance to the system after 10 years of regulatory creep that has seen the pendulum swing too far away from borrower beware to lender beware.”
Tight lending policies have long been an issue for the real estate and building sectors.
A survey of Australian builders undertaken by Housing Industry Association in August highlighted access to finance and the lending practices of banks, not COVID-19, as the biggest problem they faced.
“It’s a pity that it has taken a recession for these rules to change,” said Managing Director HIA Graham Wolfe.
“Currently it is three times harder for a first home buyer to get a loan, despite low interest rates making it being easier to service a mortgage,” Mr Wolfe said.
“It’s only fitting that lenders and customers have their hands untied to work together to appropriately assess the risk and the loan.
“By allowing rules to be eased the government is also allowing millions of dollars to be injected into the economy at a time when Australia needs it most.
“The support the government is already giving with HomeBuilder and the First Home Loan Deposit Scheme will provide incentive for customers to buy a new home. Today’s announcement will allow banks to work with customers to ensure they get into a home faster.
“Easing access to finance pulled us out of the 1990s recession and it will do the same now.”