After a resurgence last year, low-docs are on the decline according to mortgage broker Loan Market, shutting some borrowers out of the lending market.
The company has released research indicating low-doc applications have fallen by half, accounting for only five percent of overall loan lodgements. Before NCCP regulations introduced on 1 July of last year, the loans accounted for 10% of Loan Market's lodgements. Chief Operating Officer Dean Rushton has put the decrease down to lender caution following NCCP legislation.
“Under the new NCCP legislation, lenders are being more cautious when lending to the self-employed and small business owners who, unlike PAYG borrowers, do not have straightforward pay slips or group certificates to verify their annual income. As a result, many hard working self-employed people and small business owners are finding it harder to get finance,” he commented.
Homeloans Ltd general manager of operations and funding Scott McWilliams agrees, and has told Australian BrokerNews NCCP legislation may shut some borrowers out of the market.
"I think a number of lenders still believe that under NCCP, a low-doc loan is not eligible. Their argument would be that a low-doc loan may not demonstrate sufficient enquiry to see if the borrower can service the loan," he remarked.
Rushton believes the falling lender appetite for low-docs in the face of NCCP regulations will hurt many small business owners.
"Small business owners are already struggling with the impact of successive rate rises on retail sales, and are now being hit with tougher lending conditions," Rushton said.
According to McWilliams, small business owners seeking low-doc loans may not be the only borrowers to be shut out of the market by NCCP.
"I'm afraid we're going to return to the situation we had 20 years ago where a number of borrowers could not source housing finance because they did not fit within the very narrow box of what banks considered a good credit risk," he remarked.
(By: Adam Smith, 17/02/2011 )
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