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Credit crackdown to offset boost from rate cuts

johnkolenda johnkolenda
Reporter 4 minute read

“Highly restrictive” conditions in the lending landscape remain the “overriding issue” inhibiting access to credit and could offset rate cut benefits, according to the head of an aggregator.

According to Finsure’s managing director, John Kolenda, the Reserve Bank of Australia’s (RBA) decision to lower the cash rate to a record low of 1 per cent has helped improve confidence in the market and could protect the domestic economy from “headwinds” in the global economy.  

However, Mr Kolenda said that the lower interest rate environment would not reduce barriers to credit.

“The overriding issue is the lending market is still very challenging,” Mr Kolenda said.

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“There are a number of issues making it hard for consumers, and housing finance is high on the list. The latest housing finance figures for April 2019, released by the Australian Bureau of Statistics, showed the value of housing finance commitments was 19 per cent below what it was 12 months previously.”

Mr Kolenda said that the lending environment has been “highly restrictive, complicated and confusing” in the aftermath of the banking royal commission, which he said prompted “forensic examinations of borrower expenses”.

“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,” he said.

“The average consumer qualifies to borrow 20 per cent less now than 12 months ago and the criteria varies drastically across lenders.”

The Finsure MD said that government reforms could help limit the stifling effect of tighter lending conditions in the event of a global economic downturn.  

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“If a deeper deterioration in the US-China trade war impacts on the global economy with a flow-on effect in Australia, then the federal government has ammunition such as the First Home Owner Deposit Scheme, tax cuts and infrastructure spending to help negate any global economic headwinds.”

[Related: Cash rate slashed to new low]

Credit crackdown to offset boost from rate cuts
johnkolenda
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