How buying a home is set to become a lot easier with borrowers no longer required to list their Netflix and takeaway food habits
- Treasurer Josh Frydenberg has announced a relaxation of home lending rules
- Banks under existing laws are required to heavily scrutinise borrower spending
- This has seen customers asked to provide details from Netflix to takeaway food
Buying a home is set to get a lot easier with potential borrowers no longer needing to provide to the bank details of their everyday spending habits.
Treasurer Josh Frydenberg has announced an easing of mortgage and credit lending rules in a bid to spark an economy recovery from the coronavirus recession.
Under existing rules introduced in 2009, the onus is on the banks to scrutinise the daily spending of potential borrowers to determine if they are a reliable customer.
Mr Frydenberg said these rules had discouraged Australians from borrowing, despite interest rates being at a record-low of 0.25 per cent.
Buying a home is set to get a lot easier with potential borrowers no longer needing to provide the banks details of their everyday spending habits. Pictured is a stock image
‘The burden of regulation has been increasing and with it have come more obstacles for the consumer, making it harder to access credit,’ he said.
The Treasurer and Finance Minister Mathias Cormann are on Friday set to announce a scrapping of key elements of the National Consumer Credit Protection Act, which Kevin Rudd’s Labor government introduced in 2009 at the height of the Global Financial Crisis.
Prime Minister Scott Morrison’s Coalition government regards these 11-year-old responsible lending laws, designed to weed out unsuitable borrowers, as a risk in a slowing economy.
The government’s changes are set to put the onus on borrowers to tell the truth about their spending instead of forcing banks to heavily scrutinise their customers through intrusive questioning or third-party credit data groups.
This is designed to speed up home and credit approvals in a bid to encourage spending during a recession.
Mr Frydenberg said the existing rules had made lenders ‘increasingly risk averse and overly conservative’.
‘As a consequence, borrowers, irrespective of their financial circumstances, have faced an ever more intrusive, difficult and drawn-out approval process,’ he said.
In assessing loans, the big banks often obtain credit scores on potential borrowers from two main credit reporting agencies, Experian and Equifax.
These third-party agencies keep data on consumers for seven years and offer up scores, out of 1,000 and 1,200 respectively.