Tighter serviceability long overdue, says broker

“What the banks are doing and what the regulators are doing, I wholeheartedly support,” the broker said.

“[Asking more questions] just means that you’re getting a better understanding of your client, so you may be asking for more paperwork or for more intricate details, but when you think about it, we should have been asking these questions five or 10 years ago.”

Mr O’Donnell acknowledged that such measures have made his job more difficult, but he noted that they’re ensuring borrowers do not obtain loans they cannot afford.

“It is harder to place a deal. I’ve had a couple in the last few weeks come back with some weird requests from banks around expenses, or just little things that you wouldn’t have thought would be an issue, something from a bank statement a few months ago that you may have missed.

“They’re definitely picking those things up now, which is great because it’s cleaning up [the borrowing process] and hopefully will relieve mortgage stress for people who won’t qualify at this stage.”

Mr O’Donnell encouraged brokers to adapt to such reforms, stating that tighter serviceability requirements benefit all parties in the lending process.

“We can participate in broker forums and get among the MFAA and the FBAA and give them our feedback, but ultimately when something’s brought in, we’ve got to learn to adapt and we have to be very flexible,” the broker said.

“The quicker you do it, the quicker you’ll be able to service your clients.”

Mr O’Donnell added: “It benefits everyone; it’s just a lot more work. We’re all human, we don’t want to do more work for nothing, but there’s a reason why lenders and regulators are putting these things, because they believe it’s necessary.”

To hear more from Liam O’Donnell, tune into The Adviser’s Elite Broker podcast.

[Related: Best interest duty needs ‘careful consideration’: Treasury]