Banks toughen rules for inner-city units

[Alan H]

I noticed in yesterdays Fin Review("Banks toughen rules for inner-city units"- p.66) that many of the major banks seem to be reducing LVR's etc. from 80% to 70% for investment property. Apparently this is not only being driven by the banks but also the LMIs.

Maybe Rolf or someone could clarify something for me though. In the article it said "Westpac has reduced its maximum loan-to-value ratio........from 80% to 70% for investment property."

In Westpac's case, is this only for inner-city units or have they spread this policy to all investment property?

The 'Stress Tests' that the major banks used was also interesting. They are:

1. ANZ. - Undisclosed - Limits 'loss' of less than $85m over 1 year and $170m over 4 years on a $56.9bn housing porfolio.

2. CBA. - 11% fall in housing prices nationally and up to 30% in some regions. This should limit 'loss' to $50m on a $81.6bn housing portfolio..

3. NAB. - 30% fall in housing prices plus five-fold increase in defaults. Limits 'loss' to less than $100m on a $68.5bn housing portfolio.

4. Westpac. - Separately and jointly for a 4% point rise in interest rates, 20% fall in housing prices, and 200 basis point rise in unemployment. Limits 'loss' to a maximum of $64.3m on a $64.7bn housing portfolio.

 

[Aceyducey]

Alan,

Why use the major banks for investment loans anyway?

Plenty of lenders out there with greater flexibility on % and in other areas.

Cheers,

Aceyducey

 

[XBenX]

was this more a comment on the state of the market rather than what lenders to use ?

 

[brains]

This is interesting in light of the recent thread re property price crash.

http://www.somersoft.com/forums/showthread.php?s=&threadid=9124


The banks rarely get it wrong and are protecting their position.

 

[Aceyducey]

Originally posted by brains
The banks rarely get it wrong and are protecting their position.

Hey brains, I thought the banks got it wrong most of the time....

Whenever the banks start lending money like water we have a crunch, whenever they start hoarding we have a boom.

Mind you , I have got out of bank shares - I don't see there being a lot of growth in the industry in the near-term - more market share grabs. And probably a few takeovers of smaller mortgage providers coming up.

Cheers,

Aceyducey

 

[brains]

I agree with you re the near future and bank profits. They will just increase their fees to gouge some more.

As far as getting it wrong goes, it seems the banks consistently announce record profits every quarter and yearly. Thats just not record profit for banks but for all Aust. companies.

They just never seem to lose regardless of the economic environment.