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ASIC warns lenders to 'lift standards' on interest-only lending

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Australian Broker | 20 Aug 2015, 07:27 AM Agree 0
Lenders providing interest-only mortgages need to lift their standards to meet important consumer protection laws, ASIC has warned
  • RC | 20 Aug 2015, 09:38 AM Agree 0
    Where is the freedom of choice and non discrimination against the borrower in reference to lending options. With what ASIC are talking about here can blatantly penalise against older borrowers taking out a long term home loan which I was always under the belief was not acceptable from a discrinmantory lending aspect.
    Last I was aware Australia was still a non communistic society, and offered the opportunity to all Australians that were in a position to repay a home loan the opportunity to buy and live in a house they could call their home.
    Who is ASIC actually stating they are trying to protect here?
    Freedom of choice is still an Australian right.
    Also, As adults I believe we still have a right to make choices.
    ASIC.What gives you the right to believe you can discrinminate against older Australians having the right to own or buy their own home.
    This type of Legislation & bureaucratic zealousness is NOT acceptable.
    Pull you head in for once ASIC & allow us the right to choose.
    Better to have had than not too.
  • GC | 20 Aug 2015, 09:55 AM Agree 0
    Unfortunately ASIC, as usual has again got it wrong and clearly has no idea of how people manage their own mortgage. I'm sure they have never actually called any of the 140 customers whose file they audited and asked what their strategy is for having an interest only loan. That would require real effort on their part - to find out the complete story.
    The type of loan & structure is absolutely none of ASIC's business. This is between the customer and the lender only.

    Has ASIC even realised that the public are not stupid, that we do successfully manage our own affairs with their assistance or supposedly superior knowledge. Do they understand that lenders have no ability to actually control affordability once the finance has been provided? The variables that could effect affordability are incalculable so the lenders could never account for any issues that may possibly arise. The only thing they can rely on is the clients history and good character.

    ASIC are too busy telling everybody how to live, punishing people who are trying to get ahead in life with property investment and now, telling us how we should structure our own finances. If the strategy is to create wealth while only servicing the loan with interest payments then why is this a dangerous strategy? The bank holds the security - which actual history shows to grows in value, so the debt to equity ratio decreases on an ongoing basis. Therefore the risk to the bank is constantly diminishing.

    The banks have very successfully managed their businesses without ASIC interventions for over 100 years. Its about time they backed off and stop meddling in our affairs and financing. By all means, ensure the banks are strong and equitable but dont come up with dribble like this or tell us what to do with our own finance. This is something ASIC or any GOVT. department for that matter has absolutely no right to involve itself in.
  • Steve | 20 Aug 2015, 10:41 AM Agree 0
    This article shows how out of touch or ignorant the authorities are. Lenders have always assessed a loan based on P & I even for an Interest Only loans. The assessment is normally done over the shorter P & I term which reduces the borrowing capacity. This could also be highlighting the fact that the lenders are providing in appropriate loans to investors via their direct retail channels.
  • MCC | 20 Aug 2015, 10:44 AM Agree 0
    The key to the probe were the words ''focus on affordability'' & as a general rule of thumb affordability should always carry a heavy weighting when assessing credit ''risk''. However I'm sure ASICs' Kell would agree that a clients overall risk in the medium to longer term should also include the extent of amortization on associated debt, exit strategies (super / disposal of assets etc), borrowing history , employment, residential stability etc etc etc. So the question would be, was the focus on affordability in the probe to narrow?
  • GC | 20 Aug 2015, 10:53 AM Agree 0
    Further to my previous comment - under NCCP rules the loan has to be "not unsustainable" to the "customer"- NOT ASIC. The customer decides- NOT ASIC. Lose the arrogance ASIC.
  • SA | 20 Aug 2015, 12:19 PM Agree 0
    Agree with previous comments. ASIC scaremongering Banks only leads to potentially worse outcome for new and existing clients who need it in short term eg. retirement and have assets to sell or liquidate. They say the 'delinquency' rate is lower so what does this say about suitability? Very ambiguous ASIC and what other agenda do they have ?
  • Broker | 20 Aug 2015, 02:00 PM Agree 0
    It is scary to consider just how out of touch ASIC are with what happens in the real world.
  • Spencer Murray | 20 Aug 2015, 09:18 PM Agree 0
    Typical ASIC they are FULL of B Shit where are they when a consumer needs them . SORRY that is not our Department. Very easy to pass the Buck. & male Outlandish statements to the Media Get them before a Senate Inquiry & see how HE responds. I REST My
  • Broker | 21 Aug 2015, 10:29 AM Agree 0
    More inane dribble from ASIC - so ASIC now think that a Broker would recommended an interest only loan that results in static loan balance, as opposed to P&I payments that generally see the balance decreasing by approximately 2% per annum just to bolster their own trail book payments.

    Well ASIC, , if we assume that the loan is $500,000 @ 4.25% and the trail is 0.15% , the trail on a P&I loan after 12 months would be $58.81 per month , and if an interest only loan this increases by a whopping $1.03 to a grand total of $59.84 per month.

    Yep an increase a whole $1.03 per month , and that’s before the Aggregator takes their cut out of these figures.

    This latest thought bubble from ASIC is too stupid to be true, but I do wonder if they realise just how stupid they are and sound.

    I am sick of the broker industry being insulted by ASIC with their self-serving statistics - it is time they get off their lazy backsides and go and ask clients exactly what clients think of their Brokers and get back to us with some real statistics

  • GC | 21 Aug 2015, 11:58 AM Agree 0
    I listened to some ASIC muppet yesterday on the ABC radio and he was eluding to the fact that I/O loans are chosen for the client without the clients knowledge or input or consent. He sounded like an absolute fool and clearly has no idea of what transpires between broker, lender & client. Where are the heads of the banks in all of this as they seem to be quiet, or are they actually part of this and there is to be further changes in the future. Makes me wonder.......
  • SEQ Broker | 21 Aug 2015, 12:02 PM Agree 0
    Hmm, Of he loans ASIC looked at, how many were for investments? I.e. Not the owner occupied dwelling. I mean as a responsible member of the financial services fraternity, surely Principal repayment on investment debt is wasteful and not in my clients best interests. Considering a clients cash flow adn affordability in these circumstances is different. So ASIC just like you require of us, can Australia please require of you to BE SPECIFIC.
  • Broker | 22 Aug 2015, 08:57 AM Agree 0
    So based on this latest episode of ASIC logic , they would then also think that we call our clients and ask them to remove their surplus cash flow from their offset accounts too , just so we can be paid an extra $1 of trail each month.

    They seriously need a department of common sense at ASIC = ( Always Stupid Inaccurate Commentary!)
  • concerned broker | 26 Aug 2015, 01:01 PM Agree 0
    Gee Whiz, they examined a total of over 140 files! That suggests less than 150! What a tiny data base that is? Not enough in my opinion to change national lending policies?
    Where is the data on clients with interest only loans that significantly reduce their interest only loans more rapidly than those with P & I loans. Like most uninformed opinions they think an interest only client only pays the interest instead of understanding this gives a lower MINIMUM repayment, gives a client more control over their finances, lower liabilities and more access to their own equity, which reduces client risk and chance of default. Also reduces liabilities and risk in a rising rate environment. Crazy! None of these changes have been implemented to truly benefit consumers!
    The outcome, higher profit margins to lenders and higher rates to consumers and less choice for consumers. Well done ASIC
  • MCC | 26 Aug 2015, 01:53 PM Agree 0
    In viewing the comments we do need to sit back for a minute & also ask ourselves what ASIC's role is. As with most regulators, one part of their role is to appropriately enforce laws, in this case in the financial services sector. To protect Australia's credit risk by enforcing laws, does not always operate in line with the wishes of lenders, brokers, consumers & other stakeholders. Always good to look at the ''big picture''
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