The Government has announced that the new national consumer credit regime, the National Credit Code (NCC) will commence on 1 July 2010.
From my reading of the legislation, the Commonwealth has;
"specifically decided to enhance or extend the operation of the Code compared with the UCCC in the following ways:
- it covers credit for residential investment properties, providing important protections to ‘mum-and-dad’ property investors;
- it increases the monetary threshold under which consumers can request a change to certain terms of their credit contract on the grounds of financial hardship...to a fixed figure of $500,000. The code includes a new, flexible power to raise this threshold if necessary..."
Previously, hardship provisions under existing legislation generally only covered credit associated with PPORs, however this would now extend to credit for residential property i.e. IPs.
As such, I have heard that banks may be considering lowering LVR thresholds on finance for IP's where purchased in one's own name to help offset potential increased risks/costs in recovering on defaults. I have heard figures ranging from 75-60%.
If this is correct, then surely this would have a significant impact on ‘mum-and-dad’ property investors across the country.
Perhaps as a side effect it may even make purchasing through a trust struture more attractive given any such loan would not be subject to the NCC.
Can anyone confirm/clarify/correct such rumours?
From my reading of the legislation, the Commonwealth has;
"specifically decided to enhance or extend the operation of the Code compared with the UCCC in the following ways:
- it covers credit for residential investment properties, providing important protections to ‘mum-and-dad’ property investors;
- it increases the monetary threshold under which consumers can request a change to certain terms of their credit contract on the grounds of financial hardship...to a fixed figure of $500,000. The code includes a new, flexible power to raise this threshold if necessary..."
Previously, hardship provisions under existing legislation generally only covered credit associated with PPORs, however this would now extend to credit for residential property i.e. IPs.
As such, I have heard that banks may be considering lowering LVR thresholds on finance for IP's where purchased in one's own name to help offset potential increased risks/costs in recovering on defaults. I have heard figures ranging from 75-60%.
If this is correct, then surely this would have a significant impact on ‘mum-and-dad’ property investors across the country.
Perhaps as a side effect it may even make purchasing through a trust struture more attractive given any such loan would not be subject to the NCC.
Can anyone confirm/clarify/correct such rumours?
