New rules which will allow brokers and banks in Australia to analyze the spending habits of borrowers will be implemented, thus making it harder for customers to secure credit services such as home loans.
The legislation will take effect on 1 July 2010, and will enable financial institutions to analyze debt problems of loan applicants by monitoring their spending and cash withdrawals. Currently, credit analysis has been restricted to check on individual’s income and fixed outgoings.
Dean Rushton, CEO of Loan Market Group, said: "Qualifying for a mortgage is not just a matter of assessing what debts you have anymore.”
He added that "if bank statements show there’s a lot of money being spent at the casino or TAB, then that’s obviously going to ring alarm bells."
Meanwhile, Stephen Porges, chief of Aussie Home Loans, said that allowing such prying into consumer spending was a "terrible" move.
Scott Manning, an analyst from JPMorgan, said last week that mortgage stress is increasing because of the tighter lending criteria and rising interest rates, which has increased the need for Australians to compare home loans.