In this week’s episode, Dave, Cate and Pete take you through:
- What is responsible lending and when did it begin? Post the GFC there was a crackdown in high-risk lending, which led to responsible lending obligations being legislated by the Rudd Government in the National Consumer Credit Protection Act 2009 (Credit Act). The trio translate the complicated legalese of the current obligations to simple terms.
- The reasoning behind the repeal. The Property Planner, Buyer and Professor delve into the purposes of the repeal and whether it is likely to be effective at meeting the government’s goals.
- When did applying for credit get tough and what instigated it? Over the last 10 years a litany of cascading events have resulted in a gradual creep of lenders and borrowers being faced with overly prescriptive, complex and onerous processes, which really gained pace from 2014 when APRA started to put limits on lending and calls began for a Banking Royal Commission.
- What are the changes in lender behaviour we’re likely to see? The reduction in red tape is likely to see many positive impacts in speeding up the process of approvals, but be warned, the model will switch from ‘lender beware’ with a ‘borrower responsibility’ principle. What does that mean for your loan application?
- Borrowing capacity set to increase. Reduction in assessment rates could see borrowing capacity skyrocket, opening the door for prospective purchasers to up their limits.
- Gazing into the property market crystal ball. The Planner and Professor make their predictions 2021 and 2022.
- Consumer protections, who will be looking after you? With the litigious ASIC out the door, the APRA watchdog will be the sole enforcer of responsible lending obligations. But never fear, the freshly legislated best interest duty will be picking up the slack. The trio explain how.
- How does this relate to mortgage brokers? Interestingly, a significant amount of paperwork that mortgage brokers are currently required to complete and provide to clients could be scrapped entirely. Watch this space.
- What other areas are the government targeting? Key areas of reform that haven’t received as much media spotlight are business loans and non-bank lenders. We cover off on the planned evolutions to streamline business lending and further protect vulnerable consumers by raising standards for the second and third tier lenders.
- And of course, our ‘gold nuggets’!
David Johnston- The Property Planner’s Golden nugget: job keeper and job seeker will be coming off at the same time as responsible lending will be repealed, but 2021 and 2022 will be strong periods for the property market. Less red tape equals more borrowers, more flexibility around assessment equals larger loan sizes, reducing barriers for investment loans equals more investors, which will increase property prices. For the tenants, it hopefully allows them to go and buy their own house.
Peter Koulizos – The Property Professor’s Golden nugget: get all your ducks in a row, do your tax, get your paperwork ready and be prepared so that when you go to your strategic mortgage broker in March you can jump into the property market. 2021 will be a lot better than 2020 in terms of property prices, and 2022 will be even better.