hooray for that - now we need to bin some of the dumb rules the lenders are forced to comply with.
Why is an interest only loan at 20% LVR far more expensive (perceived as more risky?) than a p+i loan at 80% LVR?
Why is an investment loan at 20% LVR more expensive than a home loan at 80% LVR?
These distortions are not good.
And why are bank assessors being forced to trawl through customer statements to find netflix and gym subscriptions that will be cancelled ASAP at the first sign of trouble paying off the loan? But they don't ask if you have a pet which is something that you will not stop feeding, but that you might amend the diet of to save money. If you have bought something at a pet shop - it may have been a gift, if you don't own a pet, but they might assume you have an ongoing pet expense without asking.
They also refuse to look forward in time - people can do a lot to improve their income, and incomes naturally rise for many people. Some people have employers who are always offering overtime for example. Some people will decide to uber on weekends if they want the extra cash.
It is so rare for borrowers to make a big error in choosing a loan that we have regulatory overload for very little reason- as far as calculating loan serviceability is concerned.
The lowest risk borrowers are the smart ones who use their brains. The lowest risk regulators should likewise use their brains as well. We don't want to stop intelligent people from being able to take calculated risks, that benefit everybody.
Nuff soapbox from me
MOC Price at posting:
$1.15 Sentiment: Buy Disclosure: Held
