Newspaper article Sunshine Coast Daily (Maroochydore, Australia)

Tough Lending Negates Lower Rates

Newspaper article Sunshine Coast Daily (Maroochydore, Australia)

Tough Lending Negates Lower Rates

Article excerpt

A CHALLENGING lending market is overriding the ability of many consumers to benefit from the lowest official interest rates in Australia's history, says leading mortgage aggregator Finsure Group.

Finsure managing director John Kolenda said the Reserve Bank of Australia's cash rate - now at a record low of 1.0% after back-to-back 25 basis point cuts - has helped consumer confidence and provided stability for the domestic economy despite global headwinds.

But he said the likelihood of even lower interest rates was not helping consumers seeking finance.

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

"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 the lending landscape has been highly restrictive, complicated and confusing since the Hayne Royal Commission, with forensic examination of borrower expenses significantly reducing borrowing power for consumers.

"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% less now than 12 months ago and the criteria varies drastically across lenders."

Mr Kolenda said RBA interest rate cuts are not the only tool to stimulate the economy and it should not be left to the central bank to do the heavy lifting.

"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."

The Real Estate Institute of Queensland has been underwhelmed by the RBA's further cut to the official cash rate. …

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