Last month Josh Frydenberg announced sweeping reforms to the National Consumer Credit Protection (NCCP) Act, seeming out of the blue.
The Morrison government is “Simplifying access to credit for consumers and small business” by drastically changing the obligations outlined in the National Consumer Credit Protection Act 2009 that were rolled out in response to the global financial crisis.
NCCP has imposed a growing burden on borrowers since its inception. More recently, the trudging increase of benchmarked living expenses and increasingly formulaic assessment of borrowers actual living expenses have meant that consumers access to credit is difficult. Many lenders care little for the subjective explanation of a customers living expenses and prefer to draw a line in the sand to be used for assessment.
The removal of these benchmarks would be of great assistance to those that have previously been written down as mortgage prisoners – borrowers that have taken out home loans and are now unable to move due to changes in policy, often regardless of their repayment history. If a borrower has a demonstrated and lengthy history of meeting a repayment, should this be proof their loan is affordable? Last year, ASIC published updated guidance on this exact issue, yet it was not at all implemented into any bank policy. It is yet to be seen how these reforms will be enacted in the form of policy.
Targeting this area of credit provision is designed to stimulate other areas of the economy, including the housing market. Combined with easing COVID-19 restrictions around Australia, the hope is that this will further assist consumer confidence and get buyers back to open houses. For those with stable employment, the general consensus is now is the time to buy and hopefully the lead up to Christmas will see many predictions of ‘return to the old days’ come true.
Please contact the Infocus Lending Advisory for any questions or further information regarding your mortgage and lending requirements.