It will soon become easier to qualify for a mortgage, under reforms proposed by the federal government.
Lenders will no longer have to comply with strict ‘responsible lending obligations’ when issuing mortgages, although they will still have to follow certain lending standards.
Under the current ‘lender beware’ system, lenders can be held accountable when borrowers default on their mortgages – which has made nervous lenders less willing to give out loans.
But under the proposed ‘borrower beware’ system, borrowers will become more accountable for their loan applications – which should encourage lenders to assess applications faster and say yes more often.
The government feels the current system forces lenders to use one-size-fits-all criteria when assessing loan applications; it wants to move to a system that allows lenders to take a more flexible, commonsense approach.
This change is expected to particularly benefit first home buyers and self-employed borrowers, who can struggle to qualify for loans under the current rigid system.
The reforms will take effect on 1 March 2021, if approved by parliament.