The royal commission into Banking and Financial Services has been going for a while now and everyone in the financial services industry seem to be dealing with some of the side effects. The hundreds of negative reports coming out of the inquiry has largely resulted in a blame game, as industry participants point fingers and come up with excuses. Although the final conclusions and recommendations are a while away, we think it’s only a matter of time before we see real changes.
As a mortgage broker, we’re already seeing banks chasing their tails and implement changes which have been dictated by heightened market scrutiny but what does this mean for the everyday Australian looking to buy a house or invest? We don’t know what the future is going to bring but we can tell you what is happening now and what you should be aware of before trying to get a home loan.
You can borrow less than you used to
This is causing problems for a lot of customers ranging from the small first timers to the larger investment portfolio holders. The bottom line is that if you extended yourself to capacity a few years ago you likely would not be able to get that same loan today. To add insult to injury the line between pass and fail for loan serviceability seems to be blurred with no hard and fast rules.
Spending behaviours are in focus
Do you know how much it costs you to live? That’s eating, buying clothing, paying bills, going out, etc. Indexed figures with set limits look to be on their way out as banks look to be able to try and understand customer behaviours that impact your borrowing capacity.
Loan processing is slower
Implementation of rules are wreaking havoc on loan processing times. Be prepared to wait that little bit longer for an approval.
Policies are converging
Policy niches which allow lenders to compete for different areas of the market (whether its employment types, deposits minimums, etc) are converging drying up niches. While there is a convergence there is still a spread of appetite for different levels of risk.
Confidence has eroded
Being able to say to a customer that “you should have no issue with getting that loan” is starting to become a thing of the past with transparency of approval decisions being lost as lenders implement rules. Vanilla customers (the customers banks love with full time employment and large deposits) are few and far between these days.
From our perspective while the changing landscape can be annoying if it means long term stability in the system we’re all for it. The jury is still out on that point, but time will tell. Hopefully we see increased professionalism across the industry and focus on educating the people giving advice. It seems to be me that we should be avoiding the blame game and focusing what we can fix going forward.
In a time where confidence in the banks is low and loyalty doesn't seem to count for much the broker has never been more important. As a broker my advice to customers is, find a broker, check their qualifications and time in industry, check the recommendations from friends and online platforms and let them review your loans. Nowadays education and experience is key and are essential elements to a great broker.
At Beyond Broking we pride ourselves on our experience which helps us deliver quality advice and customer service. Find out more about our skills and background here.