Record high mortgage lending to owner-occupiers, surging property prices and lenders offering low deposit mortgages could make for a perfect storm if the government’s attempt to repeal responsible lending obligations is successful, critics warn.
They say loosening responsible lending obligations would add fuel to the already hot property market and increase indebtedness, leaving home owners struggling to meet repayments if interest rates were to rise.
Figures from the Australian Bureau of Statistics for January show a 52 per cent increase in the value of new home lending to owner-occupiers compared to January 2020.
The government says repeal of responsible lending obligations is needed to free up credit, particularly to small and medium-sized businesses, and to remove red tape for lenders and borrowers. It says the protections for vulnerable customers are preserved.
The responsible lending obligations have been a bulwark of consumer protections since coming into effect in 2009. They require lenders to make credit assessments and approvals in accordance with the obligations and help ensure people are not being sold into unaffordable loans.
The government decided to pursue repeal of the obligations last year, during the depths of the COVID-19, after consultations with banks, as a way to get credit flowing through the economy again.
But with the economy staging a V-shaped recovery, house prices booming and mortgage lending for owner-occupiers at record levels, critics, including researchers, many consumer rights groups and some economists, say the responsible lending obligations are needed more than ever.
“It’s crazy to think the government is still pushing ahead with the scaling back of responsible lending obligations at a time when the property market is going through the roof,” says Sally Tindall, the research director at RateCity.
Article Source: www.brisbanetimes.com.au
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