A new update from the Australian Securities & Investments Commission (ASIC) to the regulatory guide for the National Credit Act will offer lenders better, clearer guidance on assessing the ability of borrowers to repay their loans.
The amendments provide “important protection for consumers”, according to ASIC commissioner Peter Boxall.
He said the changes came about over concerns that older borrowers were being refused loans because their employment will cease or reduce before the end of the term of the loan.
Commenting on this “unnecessarily restrictive approach”, he pointed out that while responsible lending requirements offer essential consumer protection, they should not pose an “inflexible barrier to credit for any segment of the population”.
The updated guidance is likely to affect those applying for Australian home loans, as all businesses engaging in consumer credit activities – including credit unions, finance companies, brokers, banks and payday lenders – have been subject to responsible lending obligations under the National Credit Act from the beginning of this year.
All property buyers should make themselves aware of the full cost of their purchase before applying for a loan – especially those who are purchasing their first residential home.
The Real Estate Institute of Victoria asserted that a home loan comparison service could be useful for prospective buyers, as rates can vary between lenders.