Responsible lending rollback won’t boost lending activity

By Grace Ormsby 05 October 2020 | 1 minute read

The rollback of Australia’s responsible lending laws will make little difference to the borrowing habits – and borrowing power – of individuals and businesses, according to an expert in the space.

Responsible lending rollback won’t boost lending activity

CEO and founder of debt and wealth management advisory DG Institute, Dominique Grubisa, has forecast that the deregulation of borrowing laws will not boost the economy as is hoped.

“My experience is that individuals and businesses have not been trying, and are not looking, to borrow right now,” she stated.

Instead, Ms Grubisa has observed that people have been taking advantage of low-interest rates to pay down debts faster, with those who have been successfully doing this creating savings.

“Much like the government-backed unsecured and low-rate loans, and the instant asset write-off, I predict these reforms will see very little take-up,” she continued.


And despite the perceived ease with which banks predict to now be able to offer loans, the CEO predicts that the actual effect will also have little impact on decision making by banks: “Lenders will continue to be cautious, due to existing impaired loans. Banks are currently valuing properties low, checking serviceability, and factoring in buffers such as job losses.”

“Lenders are expecting delinquent debt to hit the fan soon,” she highlighted.

She noted that over the last six months alone, banks have deferred around $500 million home loans, worth over $190 billion. That’s equal to one in 10 borrowers.

Even though banks have the discretion to continue deferrals for an additional four months, Ms Grubisa is not of the opinion that they will be willing to, meaning many mortgagors who are struggling with their repayments will be required to sell their property.

“We may have a tsunami of loans defaulting,” she said.

“With the existing regulations in place, households that want to borrow can still borrow. Under the reform, people who currently don’t qualify for loans – who have bad debt or a bad credit rating – will never qualify.”

Smart Property Investment has previously considered the winners and losers of the reform.

Responsible lending rollback won’t boost lending activity
Responsible lending rollback won’t boost lending activity
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