The effect of lower mortgage rates will fail to stimulate lending within Australia unless banks will ease their credit policies, which were tightened in the midst of investigation from the banking royal commission.
Managing director of the Finance Brokers Association of Australia (FBAA) Peter White, has said Reserve Bank of Australia’s rate cuts isn’t enough to stimulate the housing market on their own, especially as banks use unrealistic credit criteria to push legitimate buyers out of the market and disadvantage borrowers.
During the FBAA’s annual conference, White said, “We need a more considered approach to credit policy because right now there are borrowers with the capability to pay a mortgage that is being rejected for a variety of reasons.”
White stated that banks are beginning to take action as they continue to lose business, citing Commonwealth Bank’s recent decision to lower its floor rate the second time in four months as an example.
“Banks are being forced to act because the market is flat, and we will no doubt see that other banks will follow,” he added.
“The FBAA has said before that the buffer used by banks is ridiculously obstructive to borrowers.
“In no way am I suggesting we loosen the credit criteria, but in an economy that needs stimulating, interest rate cuts are only a part of the solution.
He then concluded, “Denying legitimate and credible borrowers a loan due to credit policies that make no sense doesn’t help anyone.”