Second-chance for older borrowers

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A decline in housing affordability and increased difficulties saving a deposit has shifted the average age of first home buyers upwards.

In the 2010 Mortgage Choice First Home Buyers Survey, 55% of respondents indicated they will be aged 30 years or older when purchasing their first property.

But older property virgins face another difficulty when it comes to securing a home loan – age discrimination.

In an effort to comply with new responsible lending obligations, lenders have been rejecting middle-aged applicants who lack adequate superannuation savings.

As a result, ASIC has stepped in to issue guidance for lenders asking them to loosen their credit policies.

 "We are concerned by reports of older borrowers whose employment will reduce, or cease, before the end of the loan term, being refused loans because some lenders are adopting an unnecessarily restrictive approach to meeting the responsible-lending requirements," ASIC commissioner Peter Boxall said in a statement.

He added that older borrowers often have a variety of assets other than those from employment which could be used to service a mortgage.

Guidelines in the new National Credit Act came into effect 1 January this year. While the law has not changed, ASIC’s revised guidelines addresses lenders affirms older borrowers right to access credit.

ASIC has updated RG 209 to include clarification that reasonable enquiries into a borrower's financial situation can reveal other means by which a loan can be serviced, even when there is no continued income stream. It has also provided new guidance on issues which should be considered by lenders when assessing a borrower's ability to repay a loan. Boxall said responsible lending should not keep people from securing housing finance on the basis of age.

"The new responsible lending requirements in the National Credit Act are an important protection for consumers, but they should not be an inflexible barrier to credit for any segment of the population, and should not prevent consumers obtaining credit that they can reasonably afford."

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