Self employed people have been hardest hit by the more cautious lending policies which have resulted from the global financial crisis, a national survey has found.
Loan Market Chief Operating Officer Dean Rushton said a survey of the company’s own mortgage brokers found 64 per cent believed the self-employed were the borrowers most disadvantaged in the post-GFC lending environment.
Mr Rushton said 32 per cent of the 205 brokers who responded thought first home buyers were worse off while the remaining four per cent of respondents said people refinancing were the most badly affected.
“The current credit environment makes it tough for hard working self-employed people and small business owners to obtain finance,” Mr 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 laws.
“Under the new National Consumer Credit Protection (NCCP) 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.
“Many of these borrowers are retailers who are already being hit hard with consumer caution brought on by multiple RBA rate rises in 2010.”
Mr Rushton said the current federal government review of the consumer protection laws should consider how to ensure small businesses retain access to finance under fair lending criteria.