Australians may soon be able to get a mortgage easier

Australians will soon be able to take out mortgages more easily under Federal Government plans to change credit laws.

The Australian Finance Minister, Josh Frydenberg announced today that the Federal Government plans to roll back the Responsible Lending Regulations enacted by the Rudd government in 2009. If approved, this change would remove existing ‘responsible lending’ laws, placing responsibility back on the borrower as opposed to the banks. This change will make it easier to obtain loans whilst boosting the economy.

Under previous obligations, banks and lending institutions were held accountable for issuing loans ‘unsuitable’ for the applicant. The Act placed the responsibility of issuing loans on the banks, as opposed to the applicant seeking a loan they can afford. By taking responsibility for an applicant’s ability to borrow, banks and lending institutions required additional documentation and materials to determine an applicant’s eligibility, resulting in longer process times and overall difficulty securing a home or small business loan. 

Treasurer, Josh Frydenberg stated that “our current regulatory framework, with respect to lending, is not fit for purpose”. As such, the government is proposing a new bill to reduce verification procedures placed upon borrowers by the bank.

“As Australia continues to recover from the COVID-19 pandemic, it is more important than ever that there are no unnecessary barriers to the flow of credit to households and small businesses,” he said.

The cutting of this red tape, allows the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investment Commission (ASIC) to relax the current strict monitoring of banks and non-bank lending institutions. 

If this bill passes Congress, it will take effect in March next year. This means that the paperwork required for loan applications and application processing times will be significantly shorter, and for many people, making loans easier to obtain. 

The Government has also ensured that strong consumer protections would still be in place, and banks would need to comply with existing licensing obligations to act efficiently, honestly and fairly.

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