Self-employed struggle to secure home loans
Self-employed borrowers have been hardest hit by cautious lending policies, a new survey has found.
According to a new poll conducted by mortgage broking group Loan Market Group, 64 per cent of mortgage brokers believe self-employed borrowers were the most disadvantaged in the post-global financial crisis lending environment.
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“The current credit environment makes it tough for hard working self-employed people and small business owners to obtain finance,” Loan Market chief operating officer Dean Rushton said.
“These people have felt the impact of interest rate rises last year on their businesses so they are hit with a double whammy if they also have a struggle to obtain finance.”
Mr Rushton said the self-employed often applied for low-documentation loans, which usually have higher interest rates than full document loans, larger minimum deposits and a lower loan-to-valuation ratio (LVR). But he said these low-doc loans were harder to obtain in the post-GFC climate and also as a result of the new National Consumer Credit Protection (NCCP) laws.
“Under the new National Consumer Credit Protection legislation, lenders are being more cautious when lending to the self-employed and small business owners,” he said.
“Unlike PAYG borrowers, they do not have straight forward pay slips or group certificates to verify their annual income and as a result many of these hard working people are finding it more difficult to have loan applications approved.”
Mr Rushton said Loan Market fully endorsed the objective of the NCCP laws to counter irresponsible lending practices, which had in the past included misuse of low-doc criteria.
“But unfortunately some self-employed Australians with genuine credentials to obtain finance are also being impacted,” he said.
