Repeal of “responsible lending laws” – what repeal?

by | 17 Aug 2021 | Economy, Property, Residential

Anyone who has had to go through the torment of applying for a home loan since the Royal Commission thought this was a great idea – immediately after the Libs made their intentions known in the media, the phones started ringing with people thinking it was a done deal.

Unfortunately not… the Liberals are still keen but it’s still stuck in the Senate, with opposition such a:

  • “I won’t be helping the boys’ club at the big end of town. They’re already making massive profits for their shareholders” – Jackie Lambie
  • “But I say millions of Australians should not be left vulnerable to predatory banking conduct” and The government intends to drag Australia back to the horror days when the banks called almost all the shots and acted as if they were untouchable – Pauline Hanson
  • “When the big four banks’ business model involves profiting off the misery of young people by defending ridiculously high housing prices, they have torn up their social license” – Adam Bandt

Clearly, Ms Lambie & Ms Hanson haven’t had to apply for a home loan recently, if they think that this is all about making more profit for the banks and letting them loose in the wild wild west.

As for Mr Bandt’s comment, he isn’t incorrect that looser finance laws drive housing prices up, but profiting off the misery of young people? It’s the young people trying to buy their first home who are often the victims of the excessively tight legislation – unable to meet finance clause dates because the bank is questioning why they spend $10 a month on Netflix AND $10 on Stan AND $10 on Spotify; and what’s the $4.50 debit every day to that café? Here’s the best one I’ve seen – a mortgage broker Facebook group recently had a frustrated broker saying “the assessor wants a letter from the employer to confirm that the $3 social club deduction from their payslip is voluntary”. Seriously.

Are these laws excessively tight? Yes and no. We would actually say that the real problem is in the application of them by the banks – because many of the smaller home lenders just don’t get caught up in all of the above BS – and yet they’re still being watched by APRA and there are no allegations of any breaches. Often we find the real problem to be the “box-ticking” mentality that banking continues to move more and more towards.

Is now the time to change the laws? That’s debatable… The idea for this repeal came about at the start of COVID when predictions were that housing values were going to collapse – but it’s gone completely the other way (more on that in another post!).

Supply & Demand – it’s been well proven that the greatest driver of house values is not actually “how many people want a home”, rather it’s the availability of credit. Easier access to debt = more demand from buyers = higher prices.

Does the housing market really need more fuel on the fire right now?

Click here to read our next post about property prices in 2021.