The record low interest rate environment alone will fail to stimulate lending within Australia unless banks loosen their credit policies, according to the Finance Brokers Association of Australia (FBAA).
Managing director Peter White has said RBA cuts cannot stimulate the housing market on their own, especially as banks use unrealistic credit criteria to push legitimate buyers out of the market and disadvantage borrowers.
Speaking at the FBAA’s annual conference on the Gold Coast, White said, “We need a more considered approach to credit policy because right now there are borrowers with the capability to pay a mortgage that are being rejected for a variety of reasons.”
White explained banks are beginning to take action as they continue to lose business, citing Commonwealth Bank’s recent reduction of its floor rate as an example.
“Banks are being forced to act because the market is flat, and we will no doubt see that other banks will follow," he said.
"The FBAA has said before that the buffer used by banks is ridiculously obstructive to borrowers.
“In no way am I suggesting we loosen the credit criteria, but in an economy that needs stimulating, interest rate cuts are only a part of the solution.
“Denying legitimate and credible borrowers a loan due to credit policies that make no sense doesn’t help anyone," White concluded.
