With ‘responsible lending laws’ scheduled to lift in March next year, what does this really mean for you? Rest assured that you’ll still be able to borrow responsibly…

Posted in: Insights, News


With the federal government announcing the laws will be lifted early next year to boost the Australian economic recovery post Covid-19, we will see changes to the regulatory landscape, which essentially means (the Government and Banks) freeing up the access to credit for home buyers and small businesses.

‘Responsible lending laws’ – what are they?

Essentially, the onus is currently on the bank or lender to determine loan suitability for the applicant - whether or not the borrower can repay the loan without going into substantial financial hardship. 

This is being done by scrutinising spending on your Credit card statements; too much take-away, too many subscriptions like Foxtel and Netflix. - this type of spending, known as ‘non-essential’ expenses have drawn very close scrutiny from the Lender.

These laws were introduced post Global Financial Crisis as part of the National Consumer Credit Protection Act 2009.

However, once the laws are scrapped, the banks and Lenders will rely more on the information provided by the applicants or borrowers, and where expenses are misleading or have been overlooked, the applicant would face the head rather than the lender.

In saying this, lender’s will still be required to comply with APRA’s lending standards, which require sound credit assessment and approval criteria, meaning it’s not open-slather for banks.

Why is it changing?

The federal government wants to kickstart the national economy in 2021 and by lifting the laws, they hope to reduce the cost and time it will take to access applications of credit.

“Now more than ever, it is critical that unnecessary barriers to accessing credit are removed so that consumers can continue to spend, and businesses can invest and create jobs,” adds Mr Frydenberg.

What it means for you going forward

Most importantly, you’ll still want to make sure you’re not taking on debt that you can’t afford to pay back, and that’s where we can help you, just ask your Mortgage Broker. 

We are here to guide you through the process as things change from 1 March 2021, and ensure you have a loan which you are comfortable with repaying, taking into account all of your earnings and expenses.

It simply reduces some of the red tape, and makes it easier for more  Australians and small businesses to access credit – it is absolutely still about responsible borrowing with easier access to credit.

Disclaimer: The content of this article is general information and is not financial advice, nor is it intended to imply any recommendation or opinion about any particular financial product. It does not take into consideration your personal situation and may not be relevant to your personal circumstances. Please consider your own circumstances and seek professional advice.