Living expenses on APRA radar
A speech by APRA's Wayne Byres last week highlights the increasing focus on serviceability and moving away from using HEM to assess living expenses.
An article in The Adviser this week delves into the issue, and includes commentary from our General Manager, Clive Kirkpatrick. He said that lenders should be doing more to track expenses.
"Banks already hold a whole bunch of information around their transactions, but they expect the broker to actually provide that information. For example, they ask brokers for bank statements, even if they already hold them. They ask brokers for living expenses, but they would already know what they are if the borrower is already a customer of that bank.
"If you apply for a loan with Westpac and you are already a Westpac customer, they can see your spending habits and where your money is going, but they just don't look. Why do they ask the broker that, then?
"If the underlying lender gets better at understanding what information they have, it should make a much better process for the customer and result in more truth in applications."
The article also quotes the executive director of the Finance Brokers Association of Australia (FBAA).
Peter White said: "The whole HEM issue is something that has been challenging for a while. Since the NCCP came out, ASIC gave quite succinct direction that when you are calculating serviceability for a borrower, you need to take into consideration their real expenses for living and that might be a lot more than an ABS stat that is used in the HEM."
You can read the whole article here https://www.theadviser.com.au/breaking-news/37109-living-expenses-draw-sharper-focus