More than half of interest-only loans come through the third party channel, corporate regulator ASIC has revealed ahead of its forthcoming review of mortgage brokers in regards to interest-only lending.
Speaking at the FBAA conference held on the Gold Coast in November, ASIC senior executive leader – deposit takers, credit & insurers, Michael Saadat announced that the regulator would turn its focus to mortgage brokers following its recent review of banks in regards to interest-only lending.
Saadat has now revealed to Australian Broker that the shift in focus has come after its review of lenders found that interest-only loans through the broker channel increased by 8% over two years.
“Since 2012, the proportion of interest-only loans sold through the broker channel has gone up from 49% to 57% as of the fourth quarter of 2014.”
However, despite writing more than half of the interest-only loans in the market, Saadat said the review found that the average value of an interest-only loan submitted by a broker was less than that of a bank.
“Clearly brokers are involved in arranging interest-only loans but the other thing we noted in our report was the size of interest-only loans also varies by channel, and actually, it is the direct channel rather than the broker channel where the larger interest-only loans have been provided.”
ASIC’s forthcoming review will analyse quantitative and qualitative data of around 10 to 12 large broking groups, according to Saadat. The review will also have a focus on record-keeping practices.
“We will also be looking to get individual customer files to see how brokers are meeting their responsible lending obligations, and how they go about recording the information they obtain and the verification they conduct on the file,” Saadat told Australian Broker.
“One of the findings of our review of lenders’ files was that record keeping practices were not as good as they could be, so we are quite interested to see how brokers are going with record keeping as well.”