Lending landscape “negates” rate cut benefits

by Madison Utley04 Jul 2019

Australia’s current lending conditions are preventing consumers from benefiting from the record low interest rate, according to an aggregator group.

Finsure managing director John Kolenda, has said that the RBA rate cuts are doing nothing for consumers seeking finance. 

While the rate reductions may help consumer confidence and look to provide economic stability, Kolenda feels that the lending landscape has remained “highly restrictive, complicated, and confusing” since the royal commission.

“The lending market is still very challenging. There are a number of issues making it hard for consumers, and housing finance is high on the list,” he said.

“We have seen a dramatic reduction in borrowing capacity for consumers with many being disheartened by the scrutiny of the major banks in analysing their expenses and activities.”

As of April 2019, the value of housing finance commitments was down 19% below what it was 12 months previously, according to the Australian Bureau of Statistics.

Kolenda added, “The average consumer qualifies to borrow 20% less now than 12 months ago and the criteria varies drastically across lenders.”

In a statement delivered on Tuesday, RBA governor Phillip Lowe voiced similar concerns. 

“Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality,” he said.

“Demand for credit by investors continues to be subdued and credit conditions, especially for small and medium-sized businesses, remain tight.”

Noting that central bank rate cuts are but one tool to stimulate the economy, Kolenda mentioned the federal government’s first home owner deposit scheme, promised tax cuts and infrastructure spending as strategies more likely to address the acute struggles felt in the lending environment.