Jenny and Tom (not their real names) had been finding it difficult to make ends meet. They decided to call one of their local mortgage brokers about a debt consolidation loan. They hadn't reviewed their loans for several years and their home loan was made up of two splits. One split was approximately $200,000 and the other split approximately $150,000. Their $150,000 loan was previously a fixed rate loan and it had converted to a variable rate loan that was higher than their current loan. (this is a pretty common situation when a fixed rate expires, most lenders have them revert to a high variable rate loan, knowing most customers won't review it) They also had a few credit card debt that they needed consolidated. Overall they were paying approximately $2,570 per month in repayments.
In the appointment with their local mortgage broker, Jenny and Tom had laid out their position with their debts and were now going through their income position. Jenny worked part time in her own business and also had a couple part time jobs, while Tom was working full time. The broker then entered their wages into the loan calculator and advised Jenny and Tom that due to their income, he would not be able to prove they could afford the loan and ended the meeting.
Jenny and Tom were quite confused, as they were meeting all current repayments, but could certainly benefit from getting a more competitive rate on their home loan and consolidate their debts. Unfortunately their are a lot of people who may have previously qualified for a loan would now not qualify for a loan. That is because the Australian Prudential Regulatory Authority (APRA) has tightened lending standards.