Lender Gets The Shakes!

[ocean view]

HSBC has recently made a radical decision in regards to it's policy involving investment lending...

After claims for 6 mths from John Edwards from Residex HSBC will now lend only 70% LVR for all investment properties in Australia!!!

This is due to their book being one sided, 80-20
80% of loans in the consumer market they hold are investment property loans. They wish to change that..

It is the first to our knowledge & could set a standard for other lenders to follow.
This may be a blessing & keep prices to a marginal increase for the following 2 years or maybe something different ??

Rolf have you heard of any others who may bend at the knees?

ocean view

 

[Rolf Latham]

Hiya OV

HSBC has a great serviceability model and some ok product, but has always been woosy in any case, tries to play with the big boys but is willing to take on less risk than most building societies, like down to 70 % LVR at 1 mill exposure etc, regardless of the prop use.

I would therefore NOT take HSBC as being representative of the general lender market.

ta

Rolf

 

[ocean view]

Thanks for your view,, which we respect

But I have had talks with some senior policy managers with some other lenders (majors) And some of their books are getting heavy on the investing side as well. They also mentioned that they were also looking into changing some LVR ratios.

I have used HSBC for my loans ON & OFF LAST 3 YRS.

I even had them write 90% No Mortgage insurance twice this past 12 mths. 85% has always been offered to me at no LMI.

So they have been flexi in the last 3 yrs to me. But they tell me they are only changing policy for Non regulated loans NOT Regulated which are still at 97%.

So it seems like there is more to this then meets the eye????
Hard to get a grip of!

But if another Major joins them ,,,what does that start to tell us ?

That they are just nervous about the amount of investors they have on their books or they have placed themselves open for a investor rush to sell?

HSBC not worried about Rugulated Loans???

Interesting??

OV

.

 

[Kenkoh2000]

Lender Gets the Shakes

Dear Ocean_View,

What are you actually saying then? Banks are tightening up on thier loans?.... so signs of housing bubbles and impending Fed tightening policy?

What is regulated annd non regulated loans?

Anyone In HSBC whoime you can recommend to us to apply investment loans with them for overseas investors? What's HSBC exsting terms?

Thank you for your early reply.


Regards,
Kenkoh2000

 

[Rolf Latham]

Hi OV

For a suitable barometer, in most of the Sydney, Melb, Bris market its the LMI providers that call the investment market, and they certainly have tightened what they will take on.

The lenders will still provide a 90 % to 97 % Investment lend as long as they can get it underwritten and have their risk transferred.

Im not saying there isnt a general careful review by many lenders, since most lenders have reviewed investment LVRs especially on city unit stock.

My point was that while HSBC has a big 4 image about it the reality HAS ALREADY been otherwise. I therefore think they are not representative of the majority of the lenders,

Their highish $ loan LVRs have always been lower than the majors. For example a 1.55 mill loan in sydney for a home would be at 70 %, whereas ALL majors have no issue at 80, even some of the wholesale balance sheet funders like ING and Origin will do those sorts of deals at 80.

If they have been writing IP loans at 90 % sans LMI then they are in the same boat as NAB - taking good calculated risks on exceptional borrowers and good quality securities. I bet you didnt get that 90 on an a World Square apartment :O)

ta

rolf

 

[Rolf Latham]

HI again OV

A quick PS.

The reason that HSBC isnt as concerned about POR at 97 vs IP at say 80 is the emotional drive behind it all, and the fact that at 97 % they cant lose anyway :O)

People will do almost anything to hold onto their PPOR, yet walk quite easily from an IP and let it go to foreclosure.

ta

rolf

 

[ocean view]

Rolf,,

hehe

No I can second that No world square at the moment & as long as planes fly I won't be looking either. Same as the Gold coast tower .
Thanks for you comments it does shed some extra light on the matter. But let's both hope that the majors don't join them with the lower LVR not for another 3 yrs anyway.

cheers
OV

 

[Rolf Schaefer]

I just spoke to my BDM at HSBC and he clarified this issue as follows:

For loans up to $500K LVR can be 80%, all deals with an LVR > 70% will be mortgage insured. HSBC will pay mortgage insurance if LVR between 70% and 80%.

 

[Pete]

Update - Revised Lending Policy from HSBC

I am a client of HSBC and was surprised, when I enquired in about late July, to learn that the LVR limit would drop to 70%.

I understood that this was a consequence of their mortgage insurer, PMI. It was explained to me that in fact for my particular circumstances I satisfied HSBC's criteria but failed the mortgage insurer's stricter serviceability model. I think the different consideration of tax refunds came into it. The more conservative PMI calculation being reasonable and understandable - but not helpful at the time!

PMI's calculator is at link

BTW, my borrowings already exceeded 1 mill and LVR was at 80%.

The reduction to 70% LVR has caused me to re-think my plans.

HSBC have always given me excellent service, and I would prefer to continue with them for now, if possible. I visited this morning to discuss that if they could not help me again, I would be contacting a mortgage broker this afternoon; as I am keen to buy again soon.

Welcome news at my meeting was that the HSBC position has slightly changed recently: loans approved prior to June 2003 can continue at the approved LVR and new valuations. So if the security is re-valued, borrowings can increase [and total borrowings can be the previously approved LVR times total new value of security] subject to meeting serviceablility criteria. This approval will be by HSBC without needing to go to the mortgage insurers again.

Separate new loans can be approved by HSBC without going to PMI, subject to LVR limit 70% and serviceability.

Some numbers may help. Say borrowings were previously 1 mill and LVR 80%. Hence total value 1.25 mill.

With the recent strong capital growth in Perth, growth might be around 20%. That is, new total value 1.5 mill. Keeping same LVR of 80%, borrowings can increase by 200k.

This is a healthy deposit for a new purchase/s of say 500k. 200k deposit from existing security and 350k in separate new loan. This gives comfortable 550k loan for 500k property. New standalone 350k loan is 70% LVR on 500K value.

So 80% LVR on 1.5 mill and 70% on 500k. Equivalent to overall LVR of (80% x 1500 + 70% x 500) / (1500 + 500) = 77.5%

A 70% limit on a new loan suits me just fine for now, as effective overall LVR and amount of total borrowings are in my comfort zone.

Separate news, for those interested in variable interest rate loans. if one opts (& qualifies?) for a Premier account, with charges of $50/month, one receives discount of 0.75% from the advertised variable rates. Hence, the discounted rates are now 5.7% for a variable rate loan and 5.9% for a line of credit. I do not know how competitive these rates are nor did I ask about any qualifying requirements. The variable rates at HSBC have been at their present levels for a long time - I think over 12 months.

Bit a of a longish post, but hopefully helpful to HSBC customers. My explanations are what I understood from my discussions this morning; they may not be correct. So please check with the bank to be sure.

cheers

 

[XBenX]

And here I was thinking World Square was a quality security... I mean everything that developer has done in the past has been _great_