With the idea of a cap on LVR's being raised by the RBA and in the media I was wondering what the effect of this would be.
The first impact would be on First Home owners.
My daughter is buying her first unit for just over 400 K . At an 95 % LVR , with stamp duty and legals she needs around 40 K , At an LVR of 80 % she would need around 100 K . That takes a lot of saving unless you're starting life on a fairly high income .
So it would delay that initial purchase by several years unless the government chipped in with a generous FHOG or parents / grandparents helped out.
It would slow down the rate rate at which some people invest in multiple properties however in our situation we're already only borrowing at an LVR of 80 on individual properties and using an LOC on our PPOR to pay for the difference. So it would only limit a few people who are being aggressive with their borrowing.
One thought would be to limit the LVR on subsequent properties that someone purchases , however from all accounts the number of people buying multiple properties is a small minority and I can't think that the government is going to be concerned about the pain caused to a small minority of aggressive investors as the fallout from them coming unstuck is not likely to be massive.
That does leave us with those people who only buy one investment property. I'm assuming that these people would appear to be relatively conservative then I wonder how many of these people are borrowing aggressively.
I think an 80 % LVR applied universally would cause too much disruption in the " natural order " .
Maybe a 90 % LVR for a first purchase and then an 80 % LVR on subsequent purchases in a persons name and any purchase in trust structures or within company names . Having this limit on Trust and Company holdings would also limit how aggressively the commercial side can invest and might give some added stability . I'm assuming that many commercial and development work is done on 100 % LVR ( correct or not ?) so maybe in order for there not to be a total stop , in particular in terms of new buildings , maybe the banks will be allowed to take an equity position in new developments.
The other alternative would be to limit the 80 % LVR to family trusts and superannuation funds and let Companies be un restricted.
On a personal note I'd prefer no change , allow 105 % LVR's and a really big bubble ....
, however some restriction on borrowing would lead to a more steady growth and less likelihood of intermittent crashes , but I'm assuming as human beings we'd find ways around that limitation and still be able to create booms and busts .
I'd be interested in know what the brokers on the forum find about the spread of LVR's on the loans they do.
Cliff
The first impact would be on First Home owners.
My daughter is buying her first unit for just over 400 K . At an 95 % LVR , with stamp duty and legals she needs around 40 K , At an LVR of 80 % she would need around 100 K . That takes a lot of saving unless you're starting life on a fairly high income .
So it would delay that initial purchase by several years unless the government chipped in with a generous FHOG or parents / grandparents helped out.
It would slow down the rate rate at which some people invest in multiple properties however in our situation we're already only borrowing at an LVR of 80 on individual properties and using an LOC on our PPOR to pay for the difference. So it would only limit a few people who are being aggressive with their borrowing.
One thought would be to limit the LVR on subsequent properties that someone purchases , however from all accounts the number of people buying multiple properties is a small minority and I can't think that the government is going to be concerned about the pain caused to a small minority of aggressive investors as the fallout from them coming unstuck is not likely to be massive.
That does leave us with those people who only buy one investment property. I'm assuming that these people would appear to be relatively conservative then I wonder how many of these people are borrowing aggressively.
I think an 80 % LVR applied universally would cause too much disruption in the " natural order " .
Maybe a 90 % LVR for a first purchase and then an 80 % LVR on subsequent purchases in a persons name and any purchase in trust structures or within company names . Having this limit on Trust and Company holdings would also limit how aggressively the commercial side can invest and might give some added stability . I'm assuming that many commercial and development work is done on 100 % LVR ( correct or not ?) so maybe in order for there not to be a total stop , in particular in terms of new buildings , maybe the banks will be allowed to take an equity position in new developments.
The other alternative would be to limit the 80 % LVR to family trusts and superannuation funds and let Companies be un restricted.
On a personal note I'd prefer no change , allow 105 % LVR's and a really big bubble ....
, however some restriction on borrowing would lead to a more steady growth and less likelihood of intermittent crashes , but I'm assuming as human beings we'd find ways around that limitation and still be able to create booms and busts .I'd be interested in know what the brokers on the forum find about the spread of LVR's on the loans they do.
Cliff
