In January, responsible lending guidelines of the National Credit Act were introduced and middle-aged and older Australians found themselves rejected for credit applications if they didn't have huge retirement savings in place. Individuals in their forties and fifties found their mortgage applications rejected because they would retire before the 25-year loans were paid off.
The Australian Securities and Investment Commission has helped relieve confusion of banks and non-bank lenders as they clarify the responsible lending guidelines and confirm that older Australians and retirees can downsize and sell their properties under the new guidelines. Lending has resumed to financially eligible middle-aged and retired applicants.
Clarification of Responsible Lending Guidelines
In order to clarify the somewhat confusing responsible lending guidelines, The Australian Securities and Investment Commission has indicated to lenders that they must simply ask additional questions of middle-age applicants which would help the lender determine how the applicant will make repayments on their mortgage loan when the individual retires in ten years time.
It's true that the responsible lending guidelines showed concern for older borrowers who would retire during the repayments of a loan term, but the ASIC commissioner Peter Boxall did not want lenders to create restrictive approaches to meeting the responsible lending requirements through preventing older Australians from borrowing at all.
Re/MAX Real Estate Agent Geoff Baldwin said refusing credit applications based on age is discrimination, and that the responsible lending requirements are the cause of the discrimination by lenders.
The responsible lending guidelines and the National Credit Act are designed to protect consumers but aren't supposed to create a refusal of credit to any segment of the Australian population. If Australians can prove they can reasonably afford their payments, regardless of age, they should be allowed to obtain the credit they apply for.
Mortgage Insurers Rejecting Applications From Older Australians
Chief Executive, Lisa Montgomery of RESI Home Loans, a non-bank mortgage lender, reported to BusinessDaily that loan applications for mortgages were being rejected from people approaching retirement age if they didn't have substantial retirement savings. Without retirement savings, when the individuals retire they would have no way to make mortgage loan repayments. The borrowers simply can't demonstrate their ability to repay once they retire – which is not discriminating based on age as Baldwin indicated may be happening.
Superannuation is compulsory in Australia, so the majority of people reaching retirement age will have a large enough balance to secure their mortgage loans. This change in lending eligibility will only affect a small number of people who don't have money in their super or other investments to back their purchase. The Australian Bureau of Statistics and the Association of Super Funds indicate that the average balance of a superannuation fund for individuals within 10 years of retirement is about $142,000.
Mortgage Insurers Refusing to Approve Insurance
Lenders claim that two of the biggest mortgage insurers in the country are denying approval for insurance on loans to individuals reaching retirement age who have little assets or limited superannuation funds. Insurance for mortgages with a loan to valuation ratio over 80% is generally required, and for this reason, some individuals will still be denied lending despite the clarification of the reponsible lending guidelines.
If you're an older Australian recently rejected for a mortgage loan but have adequate superannuation and/or investment assets – you may like to reapply now that there is less confusion surrounding the responsible lending guidelines.Back « Westpac Premier Advantage Package Review
While this article suggests there is hope for older applicants - only a few days ago we were refused the loan we wanted. We had sold our home, unaware of these changes, and when we found the home we wanted went to our bank of over 30 years. Despite the fact that we are retired with government guaranteed superannuaton of a more than reasonable amount, we were told by the loans' officer that the legislation was against us, the term limit would be too tight and they could not make a case for giving us the loan we wanted. Instead it was suggested we consider a revrse mortgage arangement - a sure way to economic ruin if ever there was one! So, instead of buying a very nice home that will appreciate in value and help ensure an even more confortable retirement, we will be forced into a much lower valued property that will not produce anything like the same capital gains. So in twenty years we will be looking at much less in the way of assets. So I'm sorry to say your article is misleading from my recent experience, banks are clearly seeing the legisaltion as a way to try and get people into the reverse mortgage market instead of a decent home loan. So instead of releasing people from the chance of hardship, they are condemning people to possible hardship through these provisions. Things have not improved the way your article suggests!
Thank you for your feedback. I am sorry to hear that your experience was not a positive one. It may be an option for you to seek advice from another bank, as not all banks have the same lending requirements. I wish you good luck.
Having purchased a home 18mnths for 325000 and having a 100000 deposit and 65000 in a mortgage offset account I made the mistake of splitting the home mortgage into a fixed 100000 and 125000 into a variable loan.I have never used a fixed loan account and was told if I wanted to change back to a variable loan it would cost approx $300 to transfer to variable.The fixed loan rate is 7.9%.and changing to variable would cost $3000 .Hence I decided to remortgage through another financial institution only to be told because of my age (60) they would only loan over a 10yr period making repayments $4900 per month. The current repayments of 700.00 per f/night is a manageable amount for my partner should I be unable to work.I have a good income protection policy in place.Although I am currently paying 2000 a f/n it is not a committed amount and I have the option of making the lesser repayments should the need arise.The new repayments on the new new loan would put me at a greater financial risk than we are in now with a loan over 30yrs. It could mean losing our home. Where is the logic in this? Would we not be better to remortgage over 30yrs move to a lone to a variable rate keep our house with repayments we can afford pay the bank out when the need arises and the only losers are the kids,if its not paid out before we retire.WE were very lucky we purchased when we did as we may be paying our morgtage in rent and our kids really will miss out. And it is discrimination against age.
korrigan is right that this article suggest hopes for older applicants but banks need to be secure in terms of money . they just want to be secure if the one who's older applicants would be able to pay for the loan,
Korrigan, you are 100% correct. That article is very mislaeding.
My employer offered to sell me a house she no longer wants at a price well under market value ( She asked me for $350,000 and my real estate agent valued it at over $500,000 . . official records showed she paid $330,000 in 2004 . . . she is genuine, there is no catch, she regards me as family.
The location is perfect, in fact i could not imagine finding a better one. so i went to a few banks. I offered $40,000 deposit, proposed paying another lump sum of 100,000 in july when a fixed term deposit matures, and then paying out the balance when i draw my Superannuation on my 65th birthday in April next year. And guess what . . no one was interested . . . because i was 63 and they said i could not service the loan as i was due to retire . . . rubbish .
I am trying to refinance a $78,000 mortgage due to a property settlement, have been knocked back from my own bank and every other bank, building society and credit union, due to my age, being 57. I have $145,000 equity in house and no other debts. Funny, the Judge presumed I could do it because I was only given 28 days to refinance and no provision of extra time if I needed to sell the house to comply to the order. Result I end up selling the house, rent and put myself on Public Housing!
A retired person is expected to pay a minimum of $370 per week rent on an pension of $240 per week but the banks will not accept this as a payment to a mortgage. This means in 10 years instead of paying $370 per week as a mortgage the retired person will be paying $740 per week rent. It is the governments duty to ensure housing. Instead of giving working tax payers $7000 to $8000 per year of the countries tax income allegedly to provide rental properties the same tax gift can be used to subsidise mortgages for those over 60 years and on a government pension to ensure that every ten years their rent does not double .There is no government housing available to those who are not "refugees " or do not have a criminal partner who is in jail. No option but to eat every 2nd day and freeze in winter. The viable (capitalist ) option is denied.
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