Julian Finch exposes postcode discrimination in mortgage lending

It seems absolutely ludicrous but there is truth behind the urban myth of postcode discrimination. What is postcode discrimination? It's when banks take into account where a person lives currently or wants to live, to assess if that person should be eligible for a line of credit or how much interest they should pay.

"It's preposterous that where you live determines if you can get a mortgage and what type of interest rate you will have to pay. Equifax is a credit bureau that holds the information of some 20 million Australians. They produce credit scores which are then used by banks to determine if your home loan will be approved and if so, the interest rate you will be offered," Aussie home loan specialist Julian Finch, CEO and founder of Finch Financial Services, explained.

With decades of experience in mortgage brokerage, Finch offers expert insights and advice to thousands of Aussies seeking to get their loan applications approved. His firm, Finch Financial, achieves some of the highest loan approval rates in the country and is known to secure loan approvals within a matter of minutes.  

"This form of discrimination is unacceptable. It makes it difficult for people living in certain areas to access credit and be given a fair go. It's unAustralian," Finch said.

"The reality is that this is how the system works and it is about time people realised.  You are not only judged on your own financial circumstances but whether the people around you are at risk of defaulting as well."

Postcode discrimination is rampant

"A lot of problems arise out of postcode discrimination because where you live is often linked to other factors like your wealth, your income, your age, even your ethnicity and other qualities. It's concerning because using postcode data to determine creditworthiness imposes an invisible barrier," Finch said.

"When banks use an applicant's postcode data as part of the evaluation process, they're basing their information off the history of the people who live nearby. This means that even if you're a strong applicant, with a steady income and strong saving habits, your credit score could be affected just because you live in an area that's regarded as lower in socio-economic status or a higher risk of mortgage stress."

Individual assessments vs automated algorithms

"Assessments should be made based on each individual and their unique circumstances. Loan applications should not be treated the same and the solutions should not all be cookie cutter, run of the mill solutions.  For many lenders, assessment is automatically generated based on big data insights," Finch said.

"If you are thinking about buying or refinancing, I strongly suggest you get in touch with a mortgage broker who's going to fight your corner and represent your best interests. You need a real human helping you get your loan approved, not some algorithm.

"Automated decision making is a statistical process that's dehumanising and doesn't take into account the entire matrix of factors that humans can use to determine whether the loan application should be approved.

"The other big downfall of automated decision making is that there is a lack of transparency and accountability. But it's having a huge negative impact on people's lives when they have no control over the visibility of these decisions."

Postcodes determine interest rates

"Across the country, different areas generate different risk profiles based on a range of factors," Finch said.

"These factors determine the level of risk a financial institution is prepared to take on and this is reflected in the interest rate.  If the area in which you live or want to purchase has a higher risk profile, then the interest rate will be higher. 

"In addition, the amount of money the institution is prepared to lend may vary as well.  Some lenders may only require a 10 percent deposit however if you are refinancing or purchasing in an area with a higher risk profile, the institution may raise the deposit requirement to 20 percent or more."

Not everyone gets treated the same

"In addition to postcode discrimination, not everyone is treated the same by all financial institutions because of other issues as well," Finch said.

"If someone has a life crisis in their history due to sickness or job loss which has impacted their credit rating, this may affect their ability to get finance through a number of different lenders.

"Even people living in regional areas are discriminated against compared to city folk.  Discrimination is a broad and sinister issue that can occur based on the postcode, in the form of the interest rate offered and level of deposit required, or loan approval outcome."'

Why you should use a mortgage broker

"Mortgage brokers are there to be your advocate and representative. When we suggest a loan policy for you, we are acting in your best interest because we've taken the time to talk to you and find out what your unique circumstances are, along with your needs and your goals. No computer, no matter how sophisticated, is capable of that," Finch said.

"Many people who want to apply for a mortgage go straight to the bank only to be turned down. A mortgage broker has spent his or her career building relationship with many different lenders and can be pivotal in securing you a loan with their industrial contacts, and we can often get you a better deal by dealing directly with lenders. Don't get automated algorithms get the better of you. Get a mortgage broker, talk to a real human, and get your loan approved.

"A good broker knows the system, understands how risk profiles work, and how different lenders deal with them."

About Finch Financial Services

Based in Hurstville, NSW, Finch Financial Services has been servicing Australian families and businesses with home, personal and commercial loans as well as asset finance services since 2015. Ranked amongst the top five percent of brokerages in Australia according to data from the MFAA, Finch Financial Services is a leading brokerage and family owned business that specialises in finding its customers loans that are tailored to their needs and goals.

https://finchfinancial.com.au/