Casualisation of workforce leaving Aussies unable to borrow from banks, survey reveals

THEY earn decent money and save responsibly, but millions of Australians are being rejected on loan applications, new research claims.

OUTDATED bank lending policies have seen millions of Australians rejected on loan applications, new research claims, while experts say the situation is about to get worse.

A survey of 1002 Australian adults commissioned by Pepper Money revealed 18 per cent had been rejected for loans, or 3.6 million people when weighted against the population. Of these, 26 per cent were either self-employed or worked on a casual or freelance basis.

Social demographer Mark McCrindle says the evolution of the modern workforce and the emergence of the “gig economy” – where people earn occasional income from job aggregators like Uber or Airtasker- means more Australians will be affected.

“We are only on the cusp of the gig economy,” Mr McCrindle said. “People no longer have the normal structures or box ticking in place that banks rely on. ABS data shows that while unemployment remains generally unchanged, growth in full time roles has been flat. A REST Super study found nearly a fifth of employees desired to work on a non-full time basis and 78 per cent of employers agreed it will become the norm for people to pick up additional forms of income.”

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Courtney Bowie is one of a growing number of self-employed Aussies to have a loan application rejected. Picture: Justin Lloyd

Mr McCrindle expects changes to occur within Australia’s major lenders.

“There has to be a way of including that trend into lending calculations,” he said. “Internal policies and risk profiles at banks are not keeping up with the realities. You don’t want people changing a lifestyle that works best for them in order to conform to a loan application form.”

Australian banks currently rely on big data and strict algorithms when considering loans and when applicants are self-employed or work part time, they are generally required to provide proof of income over one to two years. But while the workforce has evolved, lending policies have not become more flexible, meaning those capable of servicing a loan may miss out.

These are the “lost Australians” being ignored by the banking system, according to Mario Rehayem, Pepper Money managing director of Australian mortgages and personal loans.

Millions of Aussies have been rejected for bank loans. Picture: Generic//The Australian

“We knew a large number were being rejected,” Mr Rehayem said. “The sheer size of banks means a human style loan assessment is labour intensive and they can’t manage that.

“Banks rely on a computer to assess a customer’s needs, but no computer can understand what kind of life event a human has endured.”

The survey also revealed 54 per cent of rejected applicants were unaware of alternative options such as non-bank lenders like Pepper Money, Liberty Financial and others. Fewer customers on the books means non-bank lenders can take more time to assess an applicant’s personal situation.

“More than 40 per cent of our customers are self-employed,” Mr Rehayem said. “That’s where the human element comes in. We try to understand their situation, rather than having one policy for everyone.

“We want people to know that if they are turned down by a bank, there are alternatives to get a home loan, or a car loan, or pay for their kids’ education.”

‘Lost Aussies’ are being rejected by banks, new research claims. Picture: Generic/The Australian

Mortgage Choice spokeswoman Jessica Darnbrough said banks were required to be diligent, but it was important customers in non-traditional work situations knew their options.

“Banks are being quite cautious and lender policy has tightened somewhat,” she said. “It’s important to get online, use comparison websites, see what is happening in the market. Also, mortgage brokers are there to educate and inform customers.”

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If anyone could expect flexibility from a lender, it was Courtney Bowie. She had established her own small law firm after working as a lawyer for some years and lived with her fiance in the unit that he owned.

Courtney Bowie and her fiance could not get a loan together due to her business being less than a year old. Picture: Justin Lloyd

The pair wanted to upgrade to a house, but despite only needing to borrow 50 per cent of the value, their mortgage broker told them no bank would accept their loan application.

Ms Bowie was already earning good money, but because her business was not yet 12 months old, her income could not be considered.

“You would think there would be a little bit of leniency,” Ms Bowie said.

The pair were luckily able to organise the loan to be placed in her fiance’s name only.

“I then had to provide financials to prove I wasn’t dependant on my fiance, or that would have affected his borrowing power,” Ms Bowie said. “We are getting married and all is fine, but I would have liked to have my name on the mortgage, because we’re certainly both paying it.”

Ms Bowie said she would have explored the non-bank lender alternative if she knew it was available.

“The way the workforce is moving towards non-traditional work, the banks really aren’t keeping up.”

Originally published as Casualisation of workforce leaving Aussies unable to borrow from banks, survey reveals