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‘Overkill’: Top broker questions living expenses crackdown

by James Mitchell11 minute read
Mortgage, living expenses

One of Australia’s most successful brokers fears that mortgage professionals would leave the industry if banks continue to make the home loan application process more cumbersome.

In recent months, the major banks have ramped up their mortgage approval processes by requiring more detailed information around customer living expenses. This follows intense scrutiny of the HEM Index by the Hayne royal commission, which will return for its third round of hearings next week.

Finance Made Easy director and industry veteran Tony Bice told The Adviser that while he understands the need for more information around expenses, he questions whether they are really necessary.

“The amount of work involved in having to go down to things like how many videos someone rents out each week and if they get a Chinese meal on a Saturday night — this is the sort of level they’re getting to,” Mr Bice said.


“The end result is the more technical and complicated the loan process becomes, the more frustrated clients are going to get. I’ve been filling out expenditure sheets for 20 years. I just don’t know whether or not drilling down into expenses to the nth degree is really going to achieve that much.”

Last month, Westpac announced that borrower expenses will now be captured at an “itemised and granular level” across 13 different categories.

These include clothing and personal care, groceries, medical and health, transport, insurance, telephone, internet, pay TV and media streaming subscriptions, recreation and entertainment, owner-occupied property utilities, rates and related costs, childcare, education, investment property utilities, rates and related costs, and “other” expense.

For other categories, the Westpac Group has outlined that a broker will still be able to enter $0 for an expense type, but for certain mandatory expenses, when $0 is entered into an expense type, the broker will need to select a reason to explain why the expense does not apply to the applicant.

“Once upon a time, you had four or five key living expenses that covered all the information, and it worked,” Mr Bice said. “I’m just questioning what the end game is going to be other than showing a more succinct net surplus figure by asking an extra 20 questions.

“Fifteen years ago, a home loan proposal was a little bit complicated, but you got through it. Ten years ago, it was a bit more complicated, but you got through it.

“Five years ago, they put the heat on and you had to provide more information. Now they want us to fill out a two-page expense form covering everything including toilet rolls. You’ve got to ask where is the breaking point before a broker says, ‘You know what? I don’t need this grief. I’m not getting paid enough as it is. Now they want to get rid of trail; they’re looking at a fee for service’.

“Brokers will leave the industry. And if they leave the industry, we are back to an uncompetitive market.

“I get why they are doing more distinct expenditure. I understand the logic behind it, but I just wonder where that balancing point is between overkill and getting enough information that would satisfy an approval.”

[Related: Major bank concedes brokers were ‘bypassing’ mortgage controls]

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James Mitchell


James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.

He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.

James holds a BA (Hons) in English Literature and an MA in Journalism.


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