I've been speaking with firstmac quite extensively the last couple of days and at the moment things aren't set to change servicing wise. Apparently they've also started self insuring very recently so I'm quite keen to see how they can fill the spot that AMP and Macq used to fill.
Changes / tightening on servicing for investors
- Thread starter Marty McDonald
- Start date
Average cash out policy ....good servicing...and yes they now have in house BB funding.
And yes they do have a rental reliant " policy
i wont say policy as such..as it's not black and white...but more so the credit guys will ask a lot of question when it's rent reliant and i have experienced first hand where the credit guys would reduce LVR down to 70% for RR and take only 60% of total rent rather than 100%....doesn't always happen..but if you have a PAYG income of $70k and Rent of $120-140k etc...be careful..
We used them a lot 4-5 years ago at the peak of the NRAS....last 2 years once a month maybe...but looks like we might need to use them for more aggressive lending moving forward ( Early on though and not so much for cash out)
And yes they do have a rental reliant " policy
i wont say policy as such..as it's not black and white...but more so the credit guys will ask a lot of question when it's rent reliant and i have experienced first hand where the credit guys would reduce LVR down to 70% for RR and take only 60% of total rent rather than 100%....doesn't always happen..but if you have a PAYG income of $70k and Rent of $120-140k etc...be careful..
We used them a lot 4-5 years ago at the peak of the NRAS....last 2 years once a month maybe...but looks like we might need to use them for more aggressive lending moving forward ( Early on though and not so much for cash out)
Never a lender I turned too - but that's going to change! Whichever lenders continue to assess OFI at actual are going to be inundated with IP loans.
Cheers
Jamie
If a buyer has pre-approval and went to auction and bought a property unaware of recent change to LVRs and serviceability calculators, is it likely they are re-assessed by the lender based on the new rules (& potentially rejected) or would their finance be processed based on their pre-approval?
Each financial institution may do things differently, but interested in the views and consensus here...
Each financial institution may do things differently, but interested in the views and consensus here...
Most banks will honor the old policy till the pre-approval ( 90days generally) runs out...
But in the past some of the smaller banks ...and especially the one that DOES NOT DO A FUll pre-approval will impose the new changes.
Nevertheless despite all this talk of tightening, these Darling Harbour apartments were sold out in 5 hours this morning.
1 bedder 50sqm starts at $800,000
http://news.domain.com.au/domain/re...artment-launch-sells-out-20150523-gh822c.html
Sydney is Hot!!!!
1 bedder 50sqm starts at $800,000
http://news.domain.com.au/domain/re...artment-launch-sells-out-20150523-gh822c.html
Sydney is Hot!!!!
This is owner occupied. Don't investor will be buying that
I was chating to the agent who sold 1 Fairlawn in Turramurra last weekend
Estimated 1.9 , sold 2.19
His comment was very few of the properties sold on the Upper north shore sell to investors .
According to him , slightly quieter today , though the house next to our old PPOR had 15 though today and the most we had was 11 and average around 4 , just before Christma s when the market was hot.
What we may see is that the driver of the sydney market becomes the Upper segment , which so far hasn't moved as much .
Cliff
Estimated 1.9 , sold 2.19
His comment was very few of the properties sold on the Upper north shore sell to investors .
According to him , slightly quieter today , though the house next to our old PPOR had 15 though today and the most we had was 11 and average around 4 , just before Christma s when the market was hot.
What we may see is that the driver of the sydney market becomes the Upper segment , which so far hasn't moved as much .
Cliff
I agree mate.
Putting my regulator hat back on, regulators actually modelled out a gameplan for what we could do to be implemented post Q1 2015 if the data indicated that lending conditions were indicating a deterioration in financial system stability (lending growth metrics, etc etc).
APRA handle the financial system regulation nitty gritty - but this is part of a broader macroeconomic strategy to promote the economy while keeping a lid on building risks. I wouldn't be surprised if we saw another rate cut or so to follow this (of course that depends on the traction of this years cuts) - as lending growth 'brakes' that will provide the RBA the breathing room it needs to deliver rate cuts that have been necessary for the broader economy.
It explains the background behind lots of my posts over the last 6 months and back in early January: http://somersoft.com/forums/showthread.php?t=105167 - where i communicated much of what is happening will happen if the data indicated that it should and advised investors to start making plans for this time.
APRA's gameplan for the next 12-24 months as at mid 2014:
1. Collect data and build systems to interpret that data (mid 2014).
2. Interpret data from Q3-Q4 2015 and warn banks to get their house in order by Q1 2015.
At this point they released this letter: http://somersoft.com/forums/showpost.php?p=1249620&postcount=1
3. Examine Q1 data. Start making banks adjust their behaviour. Use incentivisation, market based tools, where possible. This will reduce the spillovers from other approaches.
We saw this begin a few months ago with Macquarie, with an investor heavy loan book, adjust their pricing.
http://somersoft.com/forums/showpost.php?p=1271348&postcount=1
4. Should growth continue past stated metrics (as it has), getting INDIVIDUAL banks to start adjusting their books to reduce risks. This is different to 'macro prudential tools' and are very much in line with APRA's micro prudential approach.
Regarding the use of 'actual repayment' - this is just prudent. Having an assessment buffer is one of our key pillars of risk/prudent lending. Applying it to debt with only one bank makes absolutely no sense when looking at the intent to that regulation (to have macroeconomic buffers in place to counter against potential interest rate rises).
Whats next:
Well i strongly suspect no further action will be necessary. Investment lending will cool substantially as a result of these changes and the data will trend back down.
IF it doesn't, then the next 'dial up' (what APRA's chief called it during consultations) - may be direct macro-prudential intervention. This will be risk based - so you may see direct controls on DSR ratios rather than the often talked about LTV ratio caps that have been applied across the Tasman and in many Asian economies.
I'm not so sure LTV ratios will come into it (BW are an anomaly that hold too much high LVR debt as a result of policy niches). Australian regulators like to target specific risks and high LVRs wasn't one of them. Although this was in early 2014 - so perhaps this has changed over the course of the last 14 months with strong asset price growth.
How long will this last?
I agree that part of this is temporary, but some of it may indeed be structural developments to the financial system. I'm not so sure about the assessment buffers on OFI debt. It is prudent to keep it as is and operate within a lower interest rate environment. But this will also be data dependent.
As a guide, credit growth in Aus at a sustainable pace is around the 7% mark. We are well past that, and in a low rate environment, i suspect it will take time for it to fall back there. We'll see high risk investors begin to de-leverage (either by debt deflation or actual deleveraging) and lower risk homeowners leverage up (cheaper rates). Exactly what the regulators are trying to do.
Cheers,
Redom
thanks Redom, good post
Whats with Westpac this morning?
Also cutting discretionary discounts.
Also cutting discretionary discounts.
Not surprising about Westpac. We got some reasonable pricing from them early last week, I guess we were fortunately (they matched other existing Westpac loans).
I suspect quite a few lenders aren't going to make any announcement on rate discounts, they'll simply refuse to negotiate. It seems like most conversations I have lately include the phrase, "Anything I say today could be wrong tomorrow".
An interesting side effect is that the banks share prices have taken a hit (according to the article, I don't follow share prices much myself). This could be an opportunity. These changes actually reduce risk to lenders and they make future investment lending more profitable. If every lender has to fall in line then market share isn't going to be significantly redistributed either. There is an argument that these changes should be increasing lenders stock prices.
I suspect quite a few lenders aren't going to make any announcement on rate discounts, they'll simply refuse to negotiate. It seems like most conversations I have lately include the phrase, "Anything I say today could be wrong tomorrow".
An interesting side effect is that the banks share prices have taken a hit (according to the article, I don't follow share prices much myself). This could be an opportunity. These changes actually reduce risk to lenders and they make future investment lending more profitable. If every lender has to fall in line then market share isn't going to be significantly redistributed either. There is an argument that these changes should be increasing lenders stock prices.
Bank share prices were pricing in a fair bit of lending growth courtesy of lower interest rates. This sort of thing cuts back on the whole growth story quite considerably. In addition, if banks have to hold more capital while doing less lending, then the return on that capital drops for both reasons.
It's not a good story for the Banks - whenever they have had to choose between more growth or less risk themselves they have always gone for more growth. But this time, it's not their choice... or their shareholders' preference!
The question is, do they have sufficient funding from deposits, securitization, covered bonds, term loan etc to match their portfolio growth?
Smaller lenders cannot lend money they don't have. They need funding for this.
I suspect there will be some clever structured finance happening between the banks, e.g. ANZ buying the mortgage backed notes of smaller lenders.
There is lots of talk about banks having to do capital raisings to meet the increased capital ratios that may / will be required.
I did always think it was amusing that lending to individuals at 90-95% was considered imprudent but the banks were only holding 5-10% equity themselves on their massive mortgage books.
Similar threads
