2020 changes to lending laws may make getting a home loan easier

You have probably already heard of loanScore and are signed up to get alerts for when you could be saving money on your home loan by refinancing.

But did you know that getting a mortgage or refinancing your home could soon be even easier thanks to planned changes in the credit laws?

In an effort to boost lending and get the economy moving again, the government is freeing up lending laws, which it says are out of date.

“These changes will make it easier for the majority of Australians and small businesses to access credit, reduce red tape, improve competition, and ensure that the strongest consumer protections are targeted at the most vulnerable Australians,” Treasurer Josh Frydenberg said when he announced the changes last week.

The current rules are “overly prescriptive, complex and unnecessarily onerous on consumers”, Frydenberg said.

The changes will remove the ‘one-size-fits-all’ approach to lending, and ensure loan applications consider the individual needs of the borrower and the type of loan they want.

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For example, lenders at present are required to obtain and verify extensive information about borrowers’ expenses, irrespective of the type of loan product or the borrower, but this will be reduced for some less-risky loans.

As a result, lenders will be able to simplify their credit assessment process and get loans to consumers faster.

Simplifying loan applications

At present, lenders are required to check the information provided to them by borrowers in their loan applications and are responsible for this even if the borrowers have misled them. The government says this has made lenders overly cautious and restricted the number of loans they offer.

Under the changes, lenders will be able to rely on the information provided by borrowers, unless there are reasonable grounds to suspect it is unreliable.

The change will also speed up the loan application process, the government says.

“As lenders can rely on the information provided by borrowers, the need for extensive verification procedures, which can often account for half the loan application process, will diminish,” the government said in its fact sheet on the proposed changes.

“This will significantly simplify the loan application process for borrowers as they will no longer need to hand over superfluous amounts of information to lenders.”

Changes yet to come

The government says borrowers will continue to have strong consumer protection, by requiring lenders to be members of Australian Financial Complaints Authority.

The changes haven’t been passed into law by Parliament yet and are not 100% guaranteed and we haven’t seen the fine print, so it would be unwise to plan to rely on them for a mortgage application.

But for people currently saving for a home deposit, it’s good to know they’re in the pipeline.

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