Commonwealth Treasurer Josh Frydenberg announced last week using the financial press that he was no hurry to make changes to the current legislation in the wake of the findings of the Hayne Royal Commission.

This stance is commendable from the Treasurer as there is enormous pressure to make quick changes to the Banking and Insurance Legislation without understanding the full impact of any decision.

What the commission doesn’t seem to understand is that consumers must also be held accountable for their own decisions, as was recently highlighted by a UBS study that found one-third of applicants lied about their loan application.

I am entirely supportive of lenders doing more analysis around verifying a client's income and expenditure. I have been personally involved in building new reg tech software that can collect documentation and analyse a client’s banking transactional data to understand their income and expenditure. However, what this analysis shows is that are very different levels of expenditure between geographical and demographic segments, and like Household Expenditure Measurement (HEM) there is no single benchmark for all borrowers.

For example, a young couple's discretionary expenditure will reduce by up to 30% when they buy their first home. Now, if we were to try and use a benchmark such as HEM for the whole industry the majority of first home buyers would not qualify based on their current expenditure. If I relate this back to myself when I bought my first home, this sounds about right. I remember curbing many of my outgoings and became much more frugal when spending money.

Consequently, there must be some leniency given to lenders to sit down with a client and negotiate a budget they both commit to moving forward. A client’s financial health can be monitored by using existing budgeting tools that are readily available in the market, and when the client moves outside the agreed budget limits, they return for credit counselling.

Mortgage brokers and banks are both capable of monitoring this type of behaviour using existing budgetary tools which in turn would improve the relationship between the client and their lender.

While the Hayne Royal Banking Commission has heard from a small component of consumers who are having problems, they haven’t heard from the majority of those clients happily paying down their debt. In most cases, up to 80% of these clients are two years in advance on their mortgage, and hardly the picture painted during the Royal Banking Commission.

Tim Brown has been in the finance industry for 39 years and has held executive roles with Aussies Home Loans, Suncorp, Macquarie Bank and Vow Financial. Tim was also on the Board of LJ Hooker, Elders Home Loans, Diversa Super, and more recently was the Chair of the Mortgage Industry Association.