“It's easier to just say no.”
Those six words from ANZ chief executive Shayne Elliott tell you everything you need to know about how mainstream banks are approaching mortgages right now.
In the past, mainstream banks were a lot more open-minded about borrowers who may have had some unusual expenses or unconventional income streams.
Now, according to Elliott, the banks are so scared of falling foul of responsible lending rules that they’re rejecting non-vanilla borrowers en masse.
“It’s easier to just say no,” Elliott said, according to remarks reported by the Australian Financial Review. “That is the risk aversion that has infected most of the banks at the moment.’’
Elliott said the responsible lending laws were unclear; as a result, ANZ was scared of unwittingly violating the rules and being punished.
“So we avoid grey areas and become very, very conservative,” he said. “Until we get clarity, we are just going to stay away. It’s just too hard.”
Responsible lending shouldn’t mean rigid lending
Elliott is half-right. Yes, responsible lending is important. But, no, assessing non-vanilla borrowers is not “too hard”.
We speak from experience. Ever since Credit Connect Group opened its doors in 2006, we’ve been strong advocates of responsible lending. But we’ve also been strong advocates of flexibility.
Responsible lending doesn’t mean sticking rigidly to one-size-fits-all criteria, as some bankers would have you believe. It just means doing background checks on borrowers to figure out if they could reasonably be expected to repay a mortgage.
The National Consumer Credit Protection Act 2009 defines responsible lending as not giving “unsuitable” loans to borrowers. As a result, lenders are obliged to “make inquiries and verification's about the consumer’s requirements, objectives and financial situation”.
Is that really “too hard”, Mr Elliott?
Credit Connect Group makes borrowing easy
While ANZ and other mainstream banks are looking for reasons to say no to borrowers, Credit Connect Group has always looked for reasons to say yes.
We’re not scared of borrowers who might have unconventional finances or less-than-perfect credit scores. Our only concern is whether borrowers could reasonably be expected to repay a mortgage. That’s why we judge applications based on individualised criteria, not rigid rules.
We believe common sense must prevail at some point as what lender would want to advance monies to a borrower that can't afford the loan which will create a default and could potentially see the lender loose monies via the sale of the asset fund.
By the way, we’re not offended if borrowers want to use us as a temporary solution! Some borrowers turn to private lenders like Credit Connect Group as a way to secure finance. After a few years, once their credit score has improved, they then refinance to a mainstream bank.
It’s just another example of Credit Connect Group’s customer-first approach. The mainstream banks close doors. We open them. That’s why borrowers love working with us.