Future of finance

[joe jo jo]

G'day,

just wanted to get a quick idea of what some of us think will happen with finance over the next year to two years. So far during the crunch, the Australian lending world has been left relatively un-changed, by comparison to that of UK, USA etc etc.
The libor and other inter-bank funds seem to be getting cheaper, but what of things such as LMI, LVR's and credit assessment, who expects what to change and for how long (if any change at all).

Cheers.

 

[marg4000]

I think we will see a return to more prudent lending criteria regarding deposits and also percentage of income allowed to be allocated for repayments.

Interest rates unknown, so much depends on external factors. Inflation could still be an issue.
Marg

 

[Token Funder]

G'day,

just wanted to get a quick idea of what some of us think will happen with finance over the next year to two years. So far during the crunch, the Australian lending world has been left relatively un-changed, by comparison to that of UK, USA etc etc.
The libor and other inter-bank funds seem to be getting cheaper, but what of things such as LMI, LVR's and credit assessment, who expects what to change and for how long (if any change at all).

Cheers.

You haven't been paying attention. Lenders have already moved back down the risk curve..they've just been discrete about it (the joy of automated credit scoring models).

Mortgage insurers have been reworking their risk appetite for 12 months and doing much the same thing

I think we will see a return to more prudent lending criteria regarding deposits and also percentage of income allowed to be allocated for repayments.
Marg

Yep. With reduced competition, plenty of good loans at healthy margins to be written without having to offer deals to anyone on the riskier end of things.

 

[ije]

Not sure if its related to the changing risk appetite of banks, my partner ( preapproved by ANZ for a greater amount then actually asked for about 3 weeks ago ) is having major issues with ANZ approving a loan at 95%. Apparently ANZ have approved the loan, but the LMI provider is either 1) backlogged ( which is what they tell us every day....) or 2) reconsidering their operations model. Either way, we have been waiting over 5 days for the LMI component of the loan to be approved, and we are stressing big time! Anyone else see this or know what this about?

 

[Ausprop]

from what i have heard the banks are 'keen' (excuse the pun) to write business but the mortgage insurers are knocking the deals on the head

 

[letiha]

we have now gotten to the point where we don't need LMI because of increased values. We are just looking in a line of credit before purchasing a block for development.

 

[Rolf Latham]

Hiya IJ

In general id say, ANZ lmi are over worked.

We are seeing similar issues.

yes lending practices are getting more prudent, BUT let me say it again.

if you are a borrower that earns ok money, have a clean CRAA, have a decent security, and want lvrs at less than 95 to 100, we have as much money as you folk would like

While on the one hand there are crys of rationing etc etc, my reality is that today, most lenders have a bunch of money to lend, indeed they are chasing us to place more loans, please,................now

ta
rolf

 

[joe jo jo]

Not sure if its related to the changing risk appetite of banks, my partner ( preapproved by ANZ for a greater amount then actually asked for about 3 weeks ago ) is having major issues with ANZ approving a loan at 95%. Apparently ANZ have approved the loan, but the LMI provider is either 1) backlogged ( which is what they tell us every day....) or 2) reconsidering their operations model. Either way, we have been waiting over 5 days for the LMI component of the loan to be approved, and we are stressing big time! Anyone else see this or know what this about?

ANZ are backed up big time. I would not be too concerned.

 

[joe jo jo]

from what i have heard the banks are 'keen' (excuse the pun) to write business but the mortgage insurers are knocking the deals on the head

LOL "Keen".

PMI Western (i.e. bank west) have been picky for the last 14 months.

 

[tobe]

Bankwest's PMI approved a deal of mine to purchase a small block in deer park, with a pre-approval to build. Got the building contract before settlement of the land and PMI decided they didnt want to stand behind their pre-approval as the block was now too small. Said they would stand behind the land unconditional, but wouldnt let the client changed products (or build). SO there are issues with LMI, but for the vast majority things still seem to sail through. I would be more worried if vals started coming in lower, that would really hit the market on the head.

 

[Rolf Latham]

Bwest and Pmi have always been funny

ta
rolf

 

[joe jo jo]

Bwest and Pmi have always been funny

ta
rolf

Might change to genworth with the recent purchase by CBA

 

[grossreal]

hi all
for me the simple answer is
the future of funding will not be made by banks within aust
nor for that matter will most of the large funding will be done by the banks here
for me as the market tightens and the funds go out of the market as they have
the external funders will fill the gap and you will see alot more foreign currency lending and loans of this type comming out of asia and even europe.
what I see is alot of the funders like bank of china, bank of queensland moving into a more agressive marketing and trying to take a bigger hold on the aust market.
the intersting market is not the resi single house market
at the moment its the bigger end of town.
the 5 mil and above that is a real tug of war at the moment
and there is alot of movement there and there is alot of very interesting products on the market that have not been seen here for some time
and this will have a very big impact on the future of funding.
especially in the bush and as the products are pushed
I think they will have a big impact on the current lenders in those markets.
remember that this cash crisis has had an impact on market that relied on the us
and the others have not been hurt that much
maybe burnt around the edges and they are in the market to lend and in a big way.
so for me is very interesting time

 

[letiha]

Bankwest's PMI approved a deal of mine to purchase a small block in deer park, with a pre-approval to build. Got the building contract before settlement of the land and PMI decided they didnt want to stand behind their pre-approval as the block was now too small. Said they would stand behind the land unconditional, but wouldnt let the client changed products (or build). SO there are issues with LMI, but for the vast majority things still seem to sail through. I would be more worried if vals started coming in lower, that would really hit the market on the head.

Thats the exact problem I had last yea problem was it was with 4 blocks and we had signed the mortgage documents aswell, meant we had to refinance ASAP - cost us atleast $40,000 in extra LMI ( still with PMI) to refinance with the National and we would have been ready to sel all of our blocks before the slowdown, but I haven't even calcultaed that into our loss.

I wouldn't go to bank west again even if they offered 2% interest rates.

 

[joe jo jo]

hi all
for me the simple answer is
the future of funding will not be made by banks within aust
nor for that matter will most of the large funding will be done by the banks here
for me as the market tightens and the funds go out of the market as they have
the external funders will fill the gap and you will see alot more foreign currency lending and loans of this type comming out of asia and even europe.
what I see is alot of the funders like bank of china, bank of queensland moving into a more agressive marketing and trying to take a bigger hold on the aust market.
the intersting market is not the resi single house market
at the moment its the bigger end of town.
the 5 mil and above that is a real tug of war at the moment
and there is alot of movement there and there is alot of very interesting products on the market that have not been seen here for some time
and this will have a very big impact on the future of funding.
especially in the bush and as the products are pushed
I think they will have a big impact on the current lenders in those markets.
remember that this cash crisis has had an impact on market that relied on the us
and the others have not been hurt that much
maybe burnt around the edges and they are in the market to lend and in a big way.
so for me is very interesting time

I think that is a possibility. Money supply is still out there and people still want to invest. Peter Schiff made a very good point last night on insight, that there may in fact be a re-surge of funds from the asian and european markets (much like you mention), as US may not be the place to invest in anymore.

I dont think this would happen overnight though.

 

[Max Carnage]

Here's a few hints on the future of finance (presuming we somehow manage to make it through the rough waters ahead without our utter financial collapse) from the RBA governor:

In countries like Australia, perhaps the long period of household debt build‑up is now giving way to a period in which balance sheets will see some consolidation. If so, household credit growth will not be as fast as it was for the past decade and a half. Perhaps we will need also to get better at turning borrowing for housing into more dwellings rather than just higher house prices.

Perhaps the finance sector globally will return to fulfilling something more like its historical role of being ‘the handmaiden of industry’, with a bit less in the way of exotic innovation of its own. In such a world, a renewed focus on the processes in the real economy which generate growth in productivity could also be apt. In the case of Australia at least, it is now hard to avoid the conclusion that underlying growth in productivity has slowed over the past five years, compared with what was seen through most of the 1990s and the early part of this decade. Of course, these things are notoriously hard to measure and there will be various opinions about the extent of the slowing, why it occurred and what might be done about it. Nonetheless, once the immediate crisis has passed, that might be a conversation worth having.

http://rba.gov.au/Speeches/2008/sp_gov_211008.html

Lending for production, not speculation?

 

[ffc1883_1996]

Perhaps we will need also to get better at turning borrowing for housing into more dwellings rather than just higher house prices.

This is something we all know SHOULD be done but most of us feel WON’T happen.

 

[Token Funder]

Here's a few hints on the future of finance (presuming we somehow manage to make it through the rough waters ahead without our utter financial collapse) from the RBA governor:
http://rba.gov.au/Speeches/2008/sp_gov_211008.html

Lending for production, not speculation?

Funding costs and availability a significant influence on house prices? Who would've thought

 

[murtagh]

Lending for production, not speculation?

Please advise on how you will be creating more free standing, 3x2 houses with garage on blocks within 5kms of the Melbourne CBD?

I just want a house with enough rooms, a garage, a little yard and to be able to walk to work. No, none of that is optional (for me).

Cheers.