A new law that will roll back the responsible lending rules may well be on the cards within as little as a week. This follows a government report that stated that home loan approval was taking far too long and that the process was intrusive.
A new law that will roll back the responsible lending rules may well be on the cards within as little as a week. This follows a government report that stated that home loan approval was taking far too long and that the process was intrusive. This is despite the recommendation by the Commissioner for Financial Services that the laws should remain.
The Senate Committee has backed the plan. They believe that banking regulations will safeguard the principles of responsible lending. Critics have pointed out that changes to the laws could have the undesirable effect of allowing consumers to borrow more than they can afford to repay. The banks would also not have to pay penalties for breaching the laws once they are removed.
Economists believe that changes to the laws will boost already spiralling property prices. Property loans has just kept rising reaching 28.8 billion in January, a record high and up 44.3% year on year.
The laws introduced in 2009, in response to the financial crisis, forces banks to ensure that their clients can afford the loans they make. Bankers must also verify the financial position of the potential lenders.
Treasurer, Josh Frydenberg first broached the subject of changing the laws in September. He hoped to give consumers some relief at a time when many were suffering financial hardships due to Covid-19.
The federal government is of the view that for the country to grow and recovery from the economic slump brought on by the pandemic, the credit system must function well. The government believes that consumers cannot access property because of the prescriptive lending environment.
The opposition and several consumer groups have opposed the action. They claim that loosening the lending environment would allow lenders to borrow money that they cannot repay.
Property brokers suggest that the long wait for home loan approval is a result of the number of applicants and not the strict approval process.
