Late last year came an announcement that, as mortgage brokers, seemed too good to be true. A reduction to the seemingly enormous and disproportionate loan processing times with the banks.
At Astute, we regularly field calls from frustrated Queenslanders looking to secure a home loan that have been declined a home loan from their trusted bank. In fairness, their bank manager might have been just as surprised as them and in their frustration, the borrower is forced to look at different alternatives. Our own experience has been in our day-to-day dealings with banks that loan processing times, generally speaking, have become stretched outside of what is normally considered a reasonable timeframe, amounting to every stage of the home loan process becoming a laborious process; with more hope than expectation as the driving emotion behind everyone’s efforts.
But alas, there’s more to the story that needs to be understood and today we’re weighing up the decision from all sides.
The background
Initially introduced in 2009 as part of the National Consumer Protection Act and following the GFC, these laws were intended to provide better protection to Australians against loans that were not suitable for their circumstances.
After the Hayne Royal Commission two years ago, it was recommended by the chief commissioner himself that this particular act not change as a way of ensuring vulnerable Australian’s don’t become victims of high-interest-rate loans seemingly impossible to get out of.
In 2019 and in the throes of the COVID pandemic, it was announced that in an effort by the Treasury to stimulate the financial economy and enable a more fluid financial market, certain restrictions on lending criteria were to be lifted.
Since then, there’s been speculation and debate as to whether these changes are going to be a help or a hindrance to Australians, particularly as the economy starts to rebound following a vaccine rollout. Those lending changes officially come into place in April 2021 and as the date draws closer, it’s no doubt an interesting viewpoint from the eyes of an investor. At the time Treasurer Josh Frydenberg said the changes would significantly cut red tape. "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," he said. "Maintaining the free flow of credit through the economy is critical to Australia's economic recovery plan."
So what do these changes mean for you?
Essentially, the amount of information required from the borrower will reduce, intending to in turn reduce the amount of time required to process the loan. With that is a requirement remaining that the credit provider still needs to comply with existing licensing obligations to act efficiently, honestly and fairly.
Essentially a change in these measures means that the ownness of responsibility shifts from the lender to the borrower- From “Lender beware” to “Borrower beware”.
So far all four major banks have welcomed the decision.
What does that mean for the level of help you’ll receive?
As a mortgage broker, our commitment to you and your interests doesn’t change. We still serve you and act in your best interests; whereas a lender will sell you products. We’re also legally obliged to make the best credit recommendation for you and for us the information required to make an adequate financial assessment will change with each client. The time it takes to assess that will also depend on the client.
Where to from here?
It’s still business as usual and our recommendation is that you get in touch with us as early as possible so we can support you through the dreaming stage, the planning stage as well as the processing stage. As we often say, if there’s a deal that can be done- we’re the ones to make that happen.
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