With the Global Financial Crisis (GFC) behind us and the economy starting to pick up after a tumultuous year, it’s time for the banks to look at easing their tight lending criteria.
Revised lending conditions which came into place in the midst of the crisis continue to make it difficult for people to borrow and for business to be transacted.
The lack of access to funds and restrictions of loans has resulted in less developments being proposed, and many planned projects – such as the $1 billion Vision Tower in Brisbane’s CBD – being shelved.
As well as the property market, small-medium enterprises (SMEs) are finding it harder to stay afloat, and individuals have begun to suffer as it becomes harder to seek out personal, business and home loans.
In the 12 months to September 2010, new home loans are expected to have fallen by $14.4 billion. In 2009, approved finance figures for investors remained 30% below pre-GFC investment.
From an individual’s perspective, it has been suggested that banks should start looking at individual means and assessing loan applications on merit, rather than the broader perspective. Even those with a good credit history and an excellent long-term relationship with their banks are finding it difficult to get approved for a loan, despite their history. Maybe its time for banks to weigh up the differences between the smart people with good credit history versus those who are more reckless with their money.
For SMEs, many have already failed to see rate cuts on the same level as mortgage holders and they also face longer delays in obtaining new loans. Companies who are already in trouble, as well as businesses who received funding during the last boom, are expected to fare worse. But as we move further into 2010, the good news is the average SME with a decent business case now has a chance of finding funding, provided it is proposed to meet the banks strict criteria.
In some aspects, if the lending criteria are lifted, what we might see is a trend similar to that of water restrictions imposed in the past.
At the end of 2007, Brisbane was faced with Level 6 water restrictions. While this meant we could no longer enjoy the life we once had, it also opened people’s eyes to the consequences of past excesses. Though these restrictions have now eased, many of us are used to living our lives as though these restrictions are still in place. Having the restrictions made us aware of the situation, we became more responsible and we learned to appreciate the resource a lot more.