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An ASIC commissioner has cast doubt on suggestions that easing responsible lending obligations would make credit more accessible and affordable.
Delivering the keynote address at the 34th Annual Credit Law Conference on Thursday ( 24 October), ASIC commissioner Kate O’Rourke has pushed back against growing views that mortgage rules are restricting the availability of credit.
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While prudential regulations are set by the Australian Prudential Regulation Authority (APRA), financial services regulations – such as responsible lending obligations (RLOs) – are set by the Australian Securities & Investments Commission (ASIC).
The government recently extended the RLO exemption for small business finance until 3 October 2026, but some players have suggested changing RLOs for mortgage lending should also be considered to improve the ability for first home buyers to access home loans.
Indeed, several commentators from the banking industry have suggested that RLOs could be tweaked to account for a first home buyer’s future earning growth.
However, O’Rourke has refuted suggestions that regulatory settings “are restricting the availability of credit”.
Speaking at the 34th Annual Credit Law Conference, O’Rourke said: “We take these concerns seriously and, in response, have reviewed ASIC and other relevant data on home and personal lending.”
After reviewing a range of publicly available information from a range of sources including the Australian Bureau of Statistics’ Lending indicators data for August 2024, as well as data from APRA and the Reserve Bank of Australia, ASIC analysis reportedly found that “consumers continue to be able to access credit overall – and it is increasing”.
“Property lending is increasing. The value of new housing loans rose by 23 per cent in the 12 months to August 2024, with monthly lending reaching $30.4 billion,” she said.
“In fact, new monthly lending for property purchases is now larger in Australia than it is in the United Kingdom. Lending by banks remains the main source – at 95.1 per cent in August 2024.
“In our view, this data dispels, to some extent, the proposition that ‘conservative settings’ are driving consumers toward non-bank lenders to any significant degree.”
The ASIC commissioner also said that while personal lending “has plateaued” (credit card transactions totalled $326 billion in the 12 months to August 2024), the annual value of debit card transactions “has been progressively increasing” (rising from $373.8 billion in August 2020 to $600.1 billion in the 12 months to August 2024).
“We acknowledge that there are a range of factors that impact the accessibility and availability of credit and that it can be difficult to unpick the varying impacts of each of these factors, including the specific impact of the responsible lending obligations,” she said.
“We will continue to monitor these settings and their outcomes – and we remain interested in new data and market developments. However, our assessment of the data suggests that easing the responsible lending obligations would not necessarily result in an increase in affordable credit.”
The Senate inquiry continues
The comments come as the government conducts its second round of hearings for its inquiry into the financial regulatory framework and home ownership, held by the Senate economics references committee.
Over the last few months, the inquiry has been seeking to understand whether the present financial regulatory framework adequately prioritises the goal of home ownership for Australians and to explore ways to reduce lending costs and improve accessibility for first home buyers.
In its first round of hearings last week, the inquiry heard from members of the broking community, who suggested serviceability buffers could be reduced and made more flexible in order to make home loans more accessible.
During the second round of hearings, held on Thursday (24 October), the Australian Banking Association (ABA) said it supported “conversations” on making buffers more flexible and also supported adjustments to RLOs.
The ABA chief of policy, Chris Taylor, told the Senate inquiry: “Current obligations for assessing a first home buyer’s serviceability do not account for their strong income growth potential, compared to other borrowers.
“First home buyers are assessed on their ability to repay a 30-year loan based, essentially, on their first year of income.
“Existing regulatory guidance could allow more flexibility for lenders to consider a borrower’s future income growth where it’s prudent to do so.”
The Senate inquiry will hear from more members of the banking industry in its second round of hearings, including three of the four major banks (CBA, NAB, and Westpac) and a series of consumer groups, who recently aggravated the broking industry by recommending to the Senate inquiry that it should direct ASIC to undertake a new review into broker remuneration and broker advice.
[Related: Government extends responsible lending exemption for SME finance]
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