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APRA’s criticism of bank lending practices might have provided brokers with a golden marketing opportunity.
FBAA chief executive Peter White said brokers can use APRA’s criticisms to differentiate themselves from banks, after the prudential regulator warned last week that some banks are engaging in “less-than-prudent” mortgage practices.
“Unlike some of the banks, brokers follow rigid instruction for lending procedures,” Mr White said.
“They look at the total capability to repay and service the debt and fully abide by responsible lending practices.”
Mr White said brokers should remind consumers that they are rigorously checked year after year, while industry compliance and regulatory standards have never been better.
His advice comes after APRA chairman Wayne Byres warned last week “the current economic environment for housing lenders is characterised by heightened levels of risk”.
Mr Byres said that although the banks have avoided the subprime lending activity that caused problems overseas, some are engaging in “less-than-prudent” mortgage practices.
One of the challenges of evaluating how lenders assess the ability of borrowers to service loans is that many lenders are less conservative than they believe, according to Mr Byres.
He pointed to a recent APRA study in which several larger lenders were asked to provide serviceability assessments for four hypothetical borrowers.
“The first surprising result from our review was the very wide range of loan amounts that, hypothetically, were offered to our borrowers,” he said.
“It was not uncommon to find the most generous ADI was prepared to lend in the order of 50 per cent more than the most conservative ADI.”
[Related: Regulator told to be alert, not alarmed]
