Reserve Bank of Australia governor Philip Lowe has warned households may find it harder to get home loans and borrowing costs could be higher as a result of the bad behaviour of banks being exposed in the Hayne royal commission. These shock predictions have recently been confirmed as several bank and non-bank lenders have increased variable interest only rates out of cycle again despite recent moves by APRA to discontinue their earlier imposition of speed bumps on interest only lending.

"It is possible that lending standards in Australia will be tightened further in the context of the current high level of public scrutiny," he told a Reserve Bank board dinner in Adelaide on Tuesday.

ANZ Banking Group chief executive Shayne Elliott says the Hayne royal commission marks a “watershed moment: for the banking sector but warned shareholders it would result in slower loan growth.

“The royal commission impact is real,” Mr. Elliott said while providing a cautious outlook, saying the focus on responsible lending in the aftermath of the royal commission would mean loans would take longer to approve and require more documentation. “People are still going to buy a home, so it doesn’t change fundamental demand, but it will change the process and will probably make it harder for people to be successful in their applications,” he said.

Elsewhere brokers across the nation reported most lenders have tightened policy and procedure around determining borrowers living expenses, a vital factor in determining a borrowers capacity to service and therefore qualify for loan approval.

Historically lenders have either relied on the HEM index or more recently, after closer regulatory scrutiny, have sought 6 fundamental monthly expense itemization. Now the majority of lenders are seeking itemization of 13 key expense categories while several of the big four now require proof of that expenditure not simply a signed declaration.

Perhaps it’s as good a time as any to talk to your financial advisor or trusted mortgage broker about shopping around for a better deal before the banks and regulators make it even harder to secure that all important APPROVAL.

Courtesy: Financial Review May 2, 2018