Borrowing Keeps Getting Tougher

Unless you’ve been on a deserted island chatting with Wilson for the last couple of months you will have heard all the noise about the Royal Commission into the Financial Services Industry.

There is a lot of information to digest, if you are interested, but one thing you can definitely “take to the bank” is that it is going to get increasingly harder to borrow in the short and medium term.

One area that is being scrutinised closely is the actual Cost of Living used in the loan application.

Until recently the lender’s calculators used what was known as a HEM (Household Expenditure Measure), which as an example allowed $32,400 for a family of four (not including rent or mortgage repayments).

Interestingly the same figure was being used whether your household income was $70k or $170k.

Now lenders are tightening up in this area and are insisting on a closer analysis of household expenditure, case by case, rather than a formula, much like the old days when you used to visit the bank manager “cap in hand”

ANZ Chief Executive Shayne Elliott says the inquiry would make the home loan approval process longer and more onerous.

The take-away from all this is that it’s best to review your loan portfolio as a matter of urgency, while you are at choice and before it is too late to do so.

If you don’t take positive action now you may find yourself stuck in your current loans.

The “Catch 22” is going to be that some borrowers who may wish to move to a lower rate or more suitable structure may not be able to do so because the new lender policy says “NO”.

We are here to assist you with a no obligation finance review which will take 30 minutes of your time and a response from us with our recommendations within 24 hours.  Please feel free to call.


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