Changes / tightening on servicing for investors

talked to my lending manager and he confirmed the same. was in a hurry during lunch break so didn't get a chance to check with him on details, do you guys know what will happen to:

1. fixed rate? can investors still get nab's advertised fixed rate below?

http://www.nab.com.au/personal/interest-rates-fees-and-charges/interest-rates-for-home-lending

2. borrowing power and final approval? will the increased loan cost lower my borrowing power? by how much? will they knock me back and refuse my loan (AIP is in place)?

3. Interest Only option? are they going to change their I/O related policies?

It is still very early stage, but I guess many of us are going to be interested in answers to the above questions, will really appreciate if can keep us updated. Thanks!

1. Yes. You can now ONLY get the advertised rates, whereas previously you might have gotten a further discount, on a case by case basis

2. marginally, as most lenders add a buffer to the actual rate when they calculate serviceability. As the actual rate is now going to be a little higher, serviceability will be marginally lower, like a bees whisker lower.

3. Nab have always been a little funny with I/O but there hasn't been any changes yet, though there's been a lot of speculation.
 
Looks like RBA and Moodys are wanting less housing investment lending

http://www.abc.net.au/news/2015-05-...-investor-lending-growth-to-slow-more/6469106

Brilliant DaveM - thanks for sharing.

Very alarming words for investors from the APRA chief.

They've done modelling on the assessment rates used for OFI debt - which is where the real serviceability impact lies.

Byres words: "I confess to struggling to see the logic of such an approach ? after all, any rise in interest rates will at some point in time affect the borrower's other debts just as they will for the new loan being sought"

They address this and make all banks move towards ING on that chart and the majority of aggressive investors go from being able to borrow for 10+ homes at decent yields to 3-4.

Its going 'public' with some of the things that are happening to behind the scenes lending calculators.

So it looks like the ways to reduce investor lending growth are:
1. Incentivising it - making the cost higher for investors relative to PPORs. Not sure this will do to much to slow anything down, but it is letting the market do the trick.
2. Serviceability calculators to bring that serviceability wall way back in for most investors.
 
Looks like RBA and Moodys are wanting less housing investment lending

http://www.abc.net.au/news/2015-05-...-investor-lending-growth-to-slow-more/6469106

wanting is all good.

Its damn hard to go against a decades old trend in advanced economies with silly labour prices..................

70 % PPOR v 30 % rental is a thing of the past and we as a nation, and certainly our governing bodies can try and stop the fundamental change, but you can only work against and underlying structural change for so long

ta
rolf
 
1. Yes. You can now ONLY get the advertised rates, whereas previously you might have gotten a further discount, on a case by case basis

2. marginally, as most lenders add a buffer to the actual rate when they calculate serviceability. As the actual rate is now going to be a little higher, serviceability will be marginally lower, like a bees whisker lower.

3. Nab have always been a little funny with I/O but there hasn't been any changes yet, though there's been a lot of speculation.

thanks a lot tobe. can I ask whether your mentioned advertised rate is just SVR? e.g. NAB's SVR is 5.43% from memory.
 
Article in the Herald sun this mornings business section "home loan crackdown" CBA changes discounts etc.....it's in the mainstream media now
 
I worry this is going to have a big impact. Sure, only a small amount of investors will be affected, but the average 1-2 IP everyday-man will misread this and think they are clamping down on everyone and incorrectly assume this is going to weigh on the market. Expectations, true or not, can have a powerful impact.
 
Since there has been many talks about foreseeing a slow down in growth of house prices, would this slow down also likely to lead to more conservative valuation than it is now by the banks too?

I know a few mates who have deposited their money for OTPs to be completed in the next yr or two, I suspect they may have it hard when the time comes to settlement.
 
I know a few mates who have deposited their money for OTPs to be completed in the next yr or two, I suspect they may have it hard when the time comes to settlement.

It's hard to say - and that's one of the unfortunate risks of OTP. Lending policies can change and markets can dip.

Cheers

Jamie
 
How will these changes likely affect an aggressive investor who has purchased several IPs in the last couple of years at high LVRs with lower income/buffers and have also relied on equity for deposits? We thought about going down this path but are entering the stage in life where we are looking to start a family so decided to keep LVR low and get as much $$ into a future PPOR as possible and borrow against this in a couple of years.
 
How will these changes likely affect an aggressive investor who has purchased several IPs in the last couple of years at high LVRs with lower income/buffers and have also relied on equity for deposits? We thought about going down this path but are entering the stage in life where we are looking to start a family so decided to keep LVR low and get as much $$ into a future PPOR as possible and borrow against this in a couple of years.

These investors have spent a good part of the last 24 months doing regular equity releases at 90% LVR, IO with no or limited explanation/documentation.

This has/is going to change so if they are unaware of these changes then they are in for a rude shock.
 
These investors have spent a good part of the last 24 months doing regular equity releases at 90% LVR, IO with no or limited explanation/documentation.

This has/is going to change so if they are unaware of these changes then they are in for a rude shock.

Provided that they don't go use this equity and invest in another property, they shouldn't have much of a shock, would they?
 
Its the opposite - the bank wants to make it harder for people to increase their LVR. Big brother wants to see people physically paying down their loans and in turn the LVR.

We are going to see a lot more of LVR based policies, pricing, etc.
 
well, what should the average investors do now? or what should investors watch for?

If you haven't already, form a partnership with a broker who can look at your situation, identify potential issues and plot your next steps.

What those steps look like will be different for every investor so it's not a one size fits all answer.
 
We thought about going down this path but are entering the stage in life where we are looking to start a family so decided to keep LVR low and get as much $$ into a future PPOR as possible and borrow against this in a couple of years.

Low lvr by themselves can get into worse trouble than a 97 % lend................

I have seen peops overextend their resources to avoid LMI or to lock into all PI repayments etc, due to the dogmatic attitude usually of well meaning but quite uninformed relos.


ta
rolf
 
Low lvr by themselves can get into worse trouble than a 97 % lend................

I have seen peops overextend their resources to avoid LMI or to lock into all PI repayments etc, due to the dogmatic attitude usually of well meaning but quite uninformed relos.


ta
rolf

Certainly, some people can't accept LMI as a cost of doing business and enabling leverage. What I'm trying to understand is how affected would someone be relying on equity releases at 90% to fund a new loan at 95%+, I'm guessing it may be more difficult than someone using cash and a new loan at 90%?

Did a similar thing happen at all around 2002/2003?
 
Certainly, some people can't accept LMI as a cost of doing business and enabling leverage. What I'm trying to understand is how affected would someone be relying on equity releases at 90% to fund a new loan at 95%+, I'm guessing it may be more difficult than someone using cash and a new loan at 90%?

Did a similar thing happen at all around 2002/2003?

Most of us don't go over 90%. The % price of LMI jumps far too much and also the credit scrutiny increases.

> 95% is more like first timers doing that to get their first step on the ladder.
 
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