Changes / tightening on servicing for investors

[windyzz]

I Went to NAB and spoken with them about these new policy and regulator.

They Advised me that the policy will start easing around October this year.

IMO these new policy introduced by APRA is just a temporary to cool down Sydney and Melbourne Market. It can't sustained forever, as other capital city has not seeing the growth that you see in Melbourne and Sydney.

Also introducing further restrictions to investors, may have an effect on rent in the long term. Sydney Rental Market is already tight enough being 1-1.5% vacancy rate.

 

[Jamie M]

They Advised me that the policy will start easing around October this year.

Realistically that's just one bankers prediction.

While I agree that it will likely blow over - I doubt anyone's got an accurate insight as to when that will occur.

Cheers

Jamie

 

[unloadmymind]

I Went to NAB and spoken with them about these new policy and regulator.

They Advised me that the policy will start easing around October this year.

IMO these new policy introduced by APRA is just a temporary to cool down Sydney and Melbourne Market. It can't sustained forever, as other capital city has not seeing the growth that you see in Melbourne and Sydney.

Also introducing further restrictions to investors, may have an effect on rent in the long term. Sydney Rental Market is already tight enough being 1-1.5% vacancy rate.

Well just maybe the renters will become FHBs

 

[euro73]

Euro that's is a bit negative I feel. For the vast majority of borrowers this wont be an issue at all. For the accumulators with multiple properties it may be a stall period until things change / their servicing increases.

Its not the end of the world yet.

Marty I have been doing this for years, as you have Im sure... capacity has no where to go. A modest annual pay rise and a modest annual rent increase will take years and years to have a positive impact on capacity. You're correct that some wont be affected, but many will be, and I'm not sure everyone is quite appreciating the seriousness of what's happening. We have the lowest rates in history and APRA is effectively saying - thats it. No additional capacity for investors. Done. Finito. fThis is literally as good as it gets , for the time being, anyway.

So if borrowing capacity is now basically tapped out, if wage growth is slow, if rental yields are low, just where do people propose the capacity is going to come from ?

In the absence of any other viable solution, such as a reintroduction of particular servicing policies that we all now know are being relied upon by many to get deals over the line, only debt reduction , significant salary increase, significant rental increases or a lotto win or inheritance will do it. Of those, only debt reduction can be manufactured via deliberate strategy.

 

[KangaBanga]

Euro I must have read your posts on some other thread, coz your arguments sounded pretty good and stuck in my head for many months.

agree that the main driver of house prices has been the availability of easy credit by the banks. a 10% difference in LVR makes a big difference in how much investors get to spend at auctions.

think it was a post about the amount investors could put into the market depending on the LVR. like with a 100k deposit or equity, an 80% LVR loan would get investors 500k but with 90%LVR its 1mil and with 95% LVR it's 2mil to speculate with, so house prices adjust accordingly.

The liquidity from SMSF investment into property market should be drying up too with the tightening.

Do think that the rising unemployment in WA/QLD will finally flow on to the other states as well, impacting yields further.

This coming week's auction results in Sydney and Melbs should be quite telling if a trend is forming.

 

[jerrybee]

They Advised me that the policy will start easing around October this year.

What?? No way, really...this is just for a few months?! Don't get my hopes up...!

 

[hobo-jo]

Seeing from a Sydney-sider's perspective, I maybe wrong but I think there's a good chance that most of these "current buyers" are likely to be investors prior to the APRA changes.

If they are current buyers (i.e. signing contracts after the changes happening now and still to come) then they will be affected by the tighter rules (assuming they are writing new loans to buy and not just buying from existing lines of credit on other properties), you seem to suggest they won't be?

 

[Peter_Tersteeg]

They Advised me that the policy will start easing around October this year.

IMO these new policy introduced by APRA is just a temporary to cool down Sydney and Melbourne Market. It can't sustained forever, as other capital city has not seeing the growth that you see in Melbourne and Sydney.

There's a Wall St saying that the Bull climbs up the stairs and the Bear jumps out the window. Essentially good stuff comes slowly, but bad stuff happens almost overnight. The bad stuff right now is unfavourable policy changes. It's been years in the making, but the implementation all seems to be happening right how.

During the GFC virtually every lender introduced restricted lending policies in one form or another with a period of only a few months. Whilst things aren't as tight today, a lot of those policies are still in place.

When investor lending growth slows down for a period of time, these policies will be relaxed and change. I agree that conditions will become more favourable. I think it will take a lot longer than October however.

The 'no more pricing for investors' policy is going to take years to claw back. Lenders love this one because it means their investment loans are going to be more profitable. It will take more competition for them to get more aggressive on pricing for investors. The banks are always slow to give up fatter profit margins.

80% LVR from BW is a nothing thing because BW were never really in the game anyway aside from the 95% niche. They'll probably relax this within a reasonable amount of time, but unless other lenders start to employ similar measures, nobody really has any need to care now or in the future.

Affordability assessment has the biggest impact and will likely take a very long time to be reviewed. I'm not sure if we'll ever see it as good as it is now. It's a result of regulation and regulation has a tenancy to advance, not retreat. Easing of this sort of thing will probably take the form of 'rate for risk' analysis as more detailed CRAA reporting filters through. I can see a time when your credit rating will have a more direct influence regarding the rates you pay and how much you can borrow.

 

[euro73]

What?? No way, really...this is just for a few months?! Don't get my hopes up...!

This is unlikely I think. APRA has been working on this since mid last year, and some changes started occurring in November and December of last year, with some banks. This is not a short term thing. T

 

[euro73]

Euro I must have read your posts on some other thread, coz your arguments sounded pretty good and stuck in my head for many months.

agree that the main driver of house prices has been the availability of easy credit by the banks. a 10% difference in LVR makes a big difference in how much investors get to spend at auctions.

think it was a post about the amount investors could put into the market depending on the LVR. like with a 100k deposit or equity, an 80% LVR loan would get investors 500k but with 90%LVR its 1mil and with 95% LVR it's 2mil to speculate with, so house prices adjust accordingly.

The liquidity from SMSF investment into property market should be drying up too with the tightening.

Do think that the rising unemployment in WA/QLD will finally flow on to the other states as well, impacting yields further.

This coming week's auction results in Sydney and Melbs should be quite telling if a trend is forming.

I think its as simple as this - LVR's and borrowing capacity determine the budgets available to buyers, which determines how much buyers can spend. When that is curtailed in any meaningful way across a significant part of any market, it will slow things down in a meaningful way.

 

[mugen]

They Advised me that the policy will start easing around October this year.

Appears rather early for them to pull back. Even if they do "start", it may be a slow process to ease back to the level of generosity of banks once were.

IMO these new policy introduced by APRA is just a temporary to cool down Sydney and Melbourne Market. It can't sustained forever, as other capital city has not seeing the growth that you see in Melbourne and Sydney.

Can't be sustained forever, but likely for the medium term.

Also introducing further restrictions to investors, may have an effect on rent in the long term. Sydney Rental Market is already tight enough being 1-1.5% vacancy rate.

I don't think that's their concern for the time being.

 

[sandyfeet]

think it was a post about the amount investors could put into the market depending on the LVR. like with a 100k deposit or equity, an 80% LVR loan would get investors 500k but with 90%LVR its 1mil and with 95% LVR it's 2mil to speculate with, so house prices adjust accordingly.

I also remember reading that. It always stood out to me and made a lot of sense.

 

[joeExpat]

Restricting LVR to investors is a prudent move but maybe a little too late. 20% across the board is pretty reasonable.
Many other countries use similar maximum LVRs now to investors to control rampant speculation, Switzerland is 80%, UK 75%, Ireland and Spain 70 to 75%.

 

[blackenator]

Hi all ,

Thanks for all the information on the thread awesome information. Just wanted to know if the CBA has had any changes in their equity polices. I have a house and am hoping to get in Valued in the next few weeks and hoping to have 90 equity redraw instead of the normal 80%.

Thanks

 

[jerrybee]

If I'm looking to extract equity only up to the 80% mark, I should be ok right?

I mean all these changes still reduces how much I could have gotten if I had done this a few weeks ago, but it doesn't blow me out of the water does it? The problem is I can't even apply for a new LOC until the next financial year (due to an expected increase in reportable earnings to the ATO) so my hands are tied right now.

 

[jpcashflow]

Hi

Hello All,

Even with the new changes, I must admit I have been flat out!!
I think these changes had to happen as opens have been going mad...
and auctions just as crazy.

But in saying that investors with cash are going to do very well in this climate.

 

[Marty McDonald]

I think its as simple as this - LVR's and borrowing capacity determine the budgets available to buyers, which determines how much buyers can spend. When that is curtailed in any meaningful way across a significant part of any market, it will slow things down in a meaningful way.

This will be the real test of how much leverage there is out there. I think your right.

 

[Jess Peletier]

If I'm looking to extract equity only up to the 80% mark, I should be ok right?

I mean all these changes still reduces how much I could have gotten if I had done this a few weeks ago, but it doesn't blow me out of the water does it? The problem is I can't even apply for a new LOC until the next financial year (due to an expected increase in reportable earnings to the ATO) so my hands are tied right now.

As long as you can still service, equity release up to 80% should be fine. Depending on lender, up to 90% should still be fine.

 

[Jess Peletier]

Hi all ,

Thanks for all the information on the thread awesome information. Just wanted to know if the CBA has had any changes in their equity polices. I have a house and am hoping to get in Valued in the next few weeks and hoping to have 90 equity redraw instead of the normal 80%.

Thanks

As long as the valuation comes in you 'should' be okay - CBA haven't changed their servicing, only their pricing. And as of today, there are no plans to change that...either that, or they're just not telling yet.

 

[jerrybee]

Ok thanks Jess. I still plan on pushing as hard as I can on this anyway as who knows, it could get worse! If there's another interest rate drop in Sept or something they may clamp down like crazy.