Tighter lending standards and “forensic” client assessment criteria mean that brokers and banks cannot be pushing consumers into larger mortgages, according to the CEO of
Mortgage Choice, John Flavell.
"The banking industry is highly regulated and both brokers and lenders are more scrupulous than ever,” he said.
“Borrowers aren’t being forced into higher loans; they are simply choosing to borrow more in order to purchase their desired asset.”
This is especially true with property prices continuing to rise across the country, Flavell told
Australian Broker.
“Certain pockets – like Sydney and Melbourne – have seen significant price growth in recent years. As a result, borrowers are forced to take out bigger loans in order to afford their desired property.”
Twenty years ago, home loan applications were single sheets of paper, he said, while a decade ago, around 50% of all mortgage applications were low-doc or no-doc, requiring borrowers to certify their income and asset position themselves.
Compared with today’s lending practices, Flavell said it was easy to see how things had improved over time.
"Today, new legislation requires brokers and lenders to forensically examine a borrower’s assets and liability situation. They are also required to verify a borrower’s employment through documentation as well as telephone checks and discussions with employers.”
This level of assessment should be respected, he said.
“The more due diligence that is undertaken and the more forensically a borrower’s financial situation is examined, the better the result for everyone. Borrowers are not finding themselves in loans they cannot afford, which is good news for the borrower, the broker and the lender.”
“At the end of the day, nobody – lender or mortgage broker – wants a consumer to be in a situation where they access credit they can't afford.”
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