Tighter lending regulations – the outcomes

Tighter lending regulations – the outcomes

In the wake of the banking royal commission, banks are employing more rigorous screening processes before agreeing to lend money to home buyers.

Not only do these tighter lending standards make it more difficult to secure the funds you need to buy a home or investment property, but they also mean the process takes much longer than it used to.

This emphasis on their responsible lending obligations ensures banks aren’t lending to those who may have difficulty repaying their loans, which seems a fairly reasonable scenario. But the side-effect is that many first-home-buyers are finding it tougher to secure the home loan they want.

Speaking to the ABC, Westpac chairman Lindsay Maxsted said last week, “It’s happening already in the sense it’s taking longer for people to get through, and some people are not getting through the net that perhaps they got through before.”

The final report from the banking royal commission is due to be issued on February 1. We’ll have to wait and see what the concluding findings are, and what further changes banks and lenders may be required to take. Having already taken steps introduced by financial regulators APRA and ASIC during 2018, it’s widely expected all lenders will implement any new recommendations.

But so long as you are not biting off more than you can chew, and are ready for the loan approval process to take a while longer than it used to, there is nothing to stop you from securing the home you want.

It may just mean seeking financial assistance or a top-up for your deposit from family rather than borrowing solely from lenders, as well as treating a first home as exactly that – a sensibly financed first rung of the ladder, rather than stretching higher before you can afford it. Banks may be less likely to lend you as much as they were prepared to lend you a year ago. But they are still keen to lend.

This is merely advice and suggestion, and is by no means responsible, nor a legal, guideline. Contact a professional before making any financial or purchasing decision.