Changes / tightening on servicing for investors

Just now, I've been confirmed by my Mortgage Broker, that Bankwest is not accepting LVR greater than 80%

So I guess for my next investment journey, it is going to be very hard to look for vendor which still allows 88% LVR.

Especially after reading this article: http://www.mortgagebusiness.com.au/breaking-news/8587-apra-to-turn-screws-on-lending-market
Interesting article, thanks for posting - i think his partly right as to possible next steps.

IMF are in town this week/month i believe and will report within a few months, i strongly suspect they'll come out with a pretty headline worthy report stating that we're in bubble territory in Sydney and action is required. Their quite strong macro-prudential intervention and tightening to serviceability calculators is a small step compared to hard LVR caps. Given this is well and truly in their mandate/expertise, its likely to send a strong message out.

APRAs next move, if required, is more direct intervention (LVR caps). If this doesn't cool than expect APRA to make changes here.

Nonetheless, it's stupid to say that this round of changes hasn't worked. Its barely been in existence and has a lag time to take an effect on prices/market.

They'll give it some time, obtain the next round of lending data from individual lenders, do their consultations (talk to all the banks), and then act if necessary. If Sydney keeps running they'll be forced to act and by the looks of this round of changes, they don't favour geographic based policy.

I posted about APRA's possible gameplan (at least my knowledge/expectations of it) in January. The only surprising part of it to me is the speed of all these changes. They've gone so strong to start with (I thought it'd be smaller steps to start, then these current changes and then direct intervention). Also his statement about the serviceability changes is that Byres made it sound permanent improvements to our prudential framework, NOT temporary (the pricing part is temporary).

In saying that, banks always find ways to innovate. Their strongly incentivised to. I'm sure in a downmarket where credit growth sits <5% APRA won't be as worried with people trying to leverage up. Banks (first and second tiers under APRA's purview) may find innovative ways to circle this.

Cheers,
Redom
 
meaning ?

please expand on your view of that

ta
rolf
Good question, I've never really had to think about what happens with dodgy lenders so I don't really know. I guess things like...increasing your rate from 5% to 15% after 3 years. Or an automatic lock in period after the introductory period (e.g. unless you explicitly opt out, once your term ticks over you're automatically locked into another 5 years). I can't think of many, I guess the nature of a "scam" is that they are inherently sneaky and difficult to imagine. I guess what I'm asking is whether you need to tread very carefully or that it's generally OK as long as they're reasonably large (i.e. clearly not a one man operation).
 
Good question, I've never really had to think about what happens with dodgy lenders so I don't really know. I guess things like...increasing your rate from 5% to 15% after 3 years. Or an automatic lock in period after the introductory period (e.g. unless you explicitly opt out, once your term ticks over you're automatically locked into another 5 years). I can't think of many, I guess the nature of a "scam" is that they are inherently sneaky and difficult to imagine. I guess what I'm asking is whether you need to tread very carefully or that it's generally OK as long as they're reasonably large (i.e. clearly not a one man operation).
commercial reality will generally make such things less likely.

reality is that a large lender can do that rate ris thing just as easily as a small one can
.

Really small lender may have more exposure to funding sources that may fluctuate

ta
rolf
 
More changes coming at end of month, mainly around assessment rates on current debt, get apps in now
CBA

make that june 27th

* higher serviceability rates
* loaded 20% repayments on other debts
* reduction on acceptable overtime/allowances etc
* yield on property capped at 6%
 
CBA

make that june 27th

* higher serviceability rates
* loaded 20% repayments on other debts
* reduction on acceptable overtime/allowances etc
* yield on property capped at 6%
So would that mean actual p+i rate+20% loading for ofi debt
Any changes on assessment of cba's own debt
Thanks
 
So would that mean actual p+i rate+20% loading for ofi debt
Any changes on assessment of cba's own debt
Thanks
yep plus 20% based on P&I for both externally and internall

for new stuff basically up 1%

if apra and asic are trying to reduce investment lending then this shotgun approach is actually impacting First home buyer and upgraders. Cashed up investors and foreign cash buyers will get a free hit at properties between $450-$700k.

I blame Redom!
 
yep plus 20% based on P&I for both externally and internall

for new stuff basically up 1%

if apra and asic are trying to reduce investment lending then this shotgun approach is actually impacting First home buyer and upgraders. Cashed up investors and foreign cash buyers will get a free hit at properties between $450-$700k.

I blame Redom!
1.Does that mean max 1% off svr for ppor. If so that is disgusting
2.The way they treat their own debt seems similar to 7.25minus svr discount, which would mean 6.25%p+i. If they load 20% on actuals, that would equate to on a 4.5% loan, 4.5+20%=5.4% p+i
Assuming little or no ofi debt, wouldnt u be better off in servicibility?

Thanks


If so that is disguisting
 
I blame Redom!
Yikes!!! Haha.

This is OK - 20% loading from where they are isn't too bad (means like last 3-4 rate cuts haven't done much for serviceability, but not as big of a change as some of the others).

Cheers,
Redom
 
1.Does that mean max 1% off svr for ppor. If so that is disgusting
2.The way they treat their own debt seems similar to 7.25minus svr discount, which would mean 6.25%p+i. If they load 20% on actuals, that would equate to on a 4.5% loan, 4.5+20%=5.4% p+i
Assuming little or no ofi debt, wouldnt u be better off in servicibility?

Thanks


If so that is disguisting
1. No mate - it means that they'll assess CBA debt at 7.25% P/I. The way they did it before meant that it often fell below this.
2. OFI debt yep - not the biggest change, just add 20%.
 
I assume that this 7.5% is really a 3% buffer? So even if the rates go up by 0.5%, they will move it to 8%? Or will they just leave it at 7.5% until the actual rates hit 7.5%?
 
1. No mate - it means that they'll assess CBA debt at 7.25% P/I. The way they did it before meant that it often fell below this.
2. OFI debt yep - not the biggest change, just add 20%.
Unfortunately these changes take them from 'reasonable', to 'pretty average'.

In the grand scheme of ranking lenders by serviceability, not much has actually changed, only the numbers have dropped (except for AMP who went from best to worse).
 
I assume that this 7.5% is really a 3% buffer? So even if the rates go up by 0.5%, they will move it to 8%? Or will they just leave it at 7.5% until the actual rates hit 7.5%?
The higher of the following rates:
 7.25% p.a.
 SVR plus 2.25% less any concession* e.g. MAV Package granted to the borrower
 5 Year Fixed Rate at time of application less any concession* e.g. MAV Package granted to the borrower
 
Ah I see, so it's unlikely for it to move in lock step with future interest rate increases (unless rates increase and the market still goes crazy).
 
i'm a tad confused as well, so it won't move from 7.5%, if interest rates move?

also what is SVR stand for?
It's probably because it's not supposed to be this indefinite buffer. I suppose they've said ok 7.5% is roughly the long term average, so we'll base all our calcs against that...unless it goes over I guess.
 
CBA

make that june 27th

* higher serviceability rates
* loaded 20% repayments on other debts
* reduction on acceptable overtime/allowances etc
* yield on property capped at 6%

You forgot to mention that neg gearing will be removed at higher LVR's :)
 
What about investing in Property using SMSF (Self Managed Super Fund),

is that tax loophole also going to be closed soon by ATO/APRA ?
 
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