Age of Borrowers

Hi All

Since the inception of the new National Credit Code, specifically it's Responsible Lending provisions, you may have noticed traditional lenders knocking back applications from applicants with a bit of maturity about them 

This obviously caused an impressive reaction, as today ASIC came out with some revised guidance regarding this challenge.  From my reading of this guidance, the Responsible Lending provisions have now been modified somewhat, so that mature borrowers can be accommodated on an individual basis.

The following link will take you to information on this issue:
http://www.asic.gov.au/asic/asic.nsf/byheadline/11-67AD+ASIC+updates+guidance+on+responsible+lending+obligations?openDocument

One of the Examples mentioned by ASIC caught my eye and somehow I think it will be used on the odd occasion  

Example 7: Future plans to sell the principal residence and down size A female consumer applying for a 25-year principal and interest home loan to purchase a new home is currently employed and can demonstrate capacity to meet repayments under the proposed loan?  However, she is 55 years old and intends to retire at age 65, with a post-retirement income insufficient to meet repayment obligations without substantial hardship. As it is likely the consumer could only meet her financial obligations post retirement by selling the home, it appears at first view that the presumption in s118(3) applies and, as a result, the loan would be unsuitable.

The lender’s inquiries about her requirements and objectives, however, reveal that she has planned for her future change in financial circumstances and, at the point that she can no longer comfortably afford repayments, intends to sell the home and downsize. She does not wish to purchase a smaller home until this time, however, and also considers thehome she is currently purchasing has greater potential to appreciate in value in the years before she has to sell it. Given her expressed intent, if her likely equity position will be such that she can readily pay the outstanding balance of the loan at the time of the planned sale, it is reasonable to assess the loan as ‘not unsuitable’.
 
Cheers,  Paul