The Global Financial Crisis certainly changed the face of Home Loan Lending. It seemed that overnight, many of the rules with lenders were changed and funding became a lot harder to get. The amount that you could borrow against the security property was drastically cut, policies were changed so that the amount of extra income from sources such as overtime, commissions, bonuses and allowances was dramatically cut which substantially reduced the amount that could be borrowed, and lenders started favouring existing clients.

Part of this was due to a marked increase in the arrears level which was a carry on effect from the GFC with job losses or overtime cuts. The mining tax and the funding difficulties for major construction also had its effect with many projects halting and again, the flow on meant job losses and less overtime.

Low Doc Lending became “dinosaur like” in that previously there was a perception that you could get a Low Doc loan as long as you had a pulse and whilst this may not have necessarily been an accurate assessment, it did provide flexibility. This was removed initially after the GFC and further impacted by the recent introduction of the National Consumer Credit Protection Act where a credit provider is now required to make certain that the borrower can cope with the debt that they are looking at taking on.

The start of 2011 has seen a dramatic change for the better. As dramatic as the effects of the GFC were, these have been reversed in many ways because of the increased competition that has returned to the market place following the return of a number of players that did go quiet during the GFC.

We have also seen a dramatic reversal of so many of the changes that were introduced after the GFC over the last few months and whilst this is great news for borrowers, the complexity that it has introduced into the home loan market is incredible and has really highlighted the need for professional advice.

The differences in policies that exist between lenders are huge and it can have an impact between having a loan approved or declined. Just because it doesn’t meet one lender’s policy, doesn’t mean that they will all say no.

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