The share prices of the big banks Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA) are all up after lending laws were relaxed.
What has happened?
It has been announced that borrowers will get faster access to loans including mortgages, personal loans, credit cards and payday lending. The laws that help decide whether customers can afford loans will be relaxed.
Banks are subject to standards set by APRA, but ASIC will be removed as a regular of bank lending obligations so that there isn’t duplication.
The onus for loans will put more responsibility on the borrower to ensure credit is available. Customers will need to provide accurate information about the ability to repay a loan.
One of the other changes is that mortgage brokers won’t be subject to responsible lending obligations.
The government is also introducing licensing rules for debt management businesses that try to chase consumers with repayments.
Critics of the change have said this may go against the spirit of the financial services royal commission. It may help borrowers get more access to credit, but in the past we have seen house prices rise if consumers have more access to credit rather than less.
Bank share prices rises
Being able to lend more to potential borrowers is obviously good news for lenders. More debt is what the banks want, which should be good for banking profits.
At the time of writing the CBA share price is up 3.5%, the Westpac share price is up 6.7%, the NAB share price is up 6.3% and the ANZ share price is up 5.25%.
Other lenders are also up, the Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is up 3.8%, the Bank of Queensland Limited (ASX: BOQ) share price is up 3.5% and the Suncorp Group Ltd (ASX: SUN) share price is up 1.4%.
Construction companies are also benefiting from this news. The Adbri Ltd (ASX: ABC) share price is up 4.8%, the Brickworks Limited (ASX: BKW) share price is up 3.3% and even the BWP Trust (ASX: BWP) share price is up 1.5%.
I’m not sure if I’d want to buy banks right now. COVID-19 impacts are still going to be around for a while. There are ASX dividend shares I would rather buy like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) which just reported.
