ASIC VS WETPAC
In mid-August, the Federal Court dismissed ASICs responsible lending case against Westpac. But what does this mean?
Previously, when people were applying for a loan, their annual living expenses were being assessed by Westpac against a broad ‘Household Expenditure Measure’ (HEM) benchmark. This assessment formed part of the overall outgoing figure which in turn would determine how much borrowing power that person would have.
As a result of the Royal Commission, APRA advised all lenders to pay more attention to living expenses, causing the credit pendulum to swing towards being ultra conservative. As a result, borrowers were being assessed on their expenses, including living and discretionary expenses – You know, those expenses that you can stop if you really wanted to without significantly affecting your lifestyle. For most of us, these can include the weekly smashed avo, expensive wine and high-end dinners.
The judge found that Westpac’s assessment of people’s living expenses was in fact ok, albeit still needed to work. In his view, people wouldn’t be in significant financial hardship if they were to stop their weekly smashed avo and wagyu beef.
This is great news for borrowers as it has set a precedence for the banks whereby, they can assess core living expenses separately from those discretionary expenses. Due to this, we should see people able to borrow more money by the end of this year once the banks implement this change. This article was reproduced courtesy of Johnston Groecke