Millennials are renowned for their love of eating out with mates or ordering takeaway, despite the costs associated with hospitality.
But new bank rules could soon put a dampener on everyone’s favourite past-time.
As loan requirements become more stringent in the wake of the financial services royal commission, lenders have our spending habits under the microscope more than ever.
“Traditionally, lenders have estimated a borrowers ability to take out a loan using something called the Household Expenditure Measure (HEM)”said Matt Carr from MC Mortgage Solutions
For example, if there are two adults in a household, they can very broadly be expected to spend ‘X’ amount each month.
But new rules mean the banks will be taking into account costs that previously didn’t register on their map, such as eating out, online shopping, gym memberships, Uber Eats and little bets at the TAB.
“Now what the banks have to do is go through your bank statements and actually review all your spending habits and check to see if the HEM is a realistic way to assess your living expenses, or if you’re spending a lot more than that,” said Matt.
The problem with this new system is that when people go to buy a home, they often cut down on that extra spending, making it tough for the banks to properly measure.
“Quite often, we’re see clients with good incomes who can easily afford a $1 million loan, but we have to tell them they can’t borrow that much because they might be spending too much on take-away,” he said.
“However, it can be confusing for the clients as not all the banks are working the same way. We’re seeing a lot of differences between lenders and a lot of frustrations from borrowers as a result.” If you’re worried about how much your Uber Eats habits could affect your ability to get a home loan, Matt says you should start cutting down at least three months before you go to buy. This is just one of the ways you could increase your chances of getting a Loan.
Don’t want to give up Uber Eats?
Alternatively, he said some lenders will allow you to make a commitment to reduce your discretionary expenses. Get in contact with MC Mortgage Solutions today to find out which bank might best suit your personal circumstances.
