AMP - IP LVR capped to 50%

A few days ago, AMP announced a hike of IP loans by 35 points (nothing new here) and a cap of 50% LVR for all new IP loans.

50%!!

Yes, there are countries in the world that limit investors to 50% LVR but as far as I know, this is the only lender here that has such a low cap.

AMP are a minor lender so no big impact on the market but if more lenders follow suit...

 

AMP also exited the investment market for a while - they all do these things to suit whatever's going on for them at the time.

I'm not concerned about a 50% LVR cap from the majority of lenders.

 

If the big 4 decided to introduce 50% LVR caps, the housing market would crash very quickly. The rest of the Australian economy would follow. We'd be living in a second world country overnight. There's no chance the government would allow this to occur.

 

You know what the politicians would do - come up with a whole raft of new measures to 'stimulate recovery' reverting the very policies which were a result of other government intervention. Round and round we go.

As per AMP - unsurprising and they already priced themselves out of the sole investment property purchase/refi space for a while now. They're good for certain investment structures and owner occupier loans for investors - but I haven't written a standalone AMP purchase/refi of investment security in a while.

 

OMG
Was this one of the lenders which provided clients with favourable servicing conditions compared to big 4?? Dont know ??

 

Nah, one of the stingiest

 

50% isn't bad considering Beyond Bank withdrew from the Investment market for the foreseable future.

 

Pre-APRA they were one of the most generous and as a result they were heavily loaded in investment loans. They changed their policies and overnight went to one of the tightest lenders. I haven't written a loan with them since then.

 

I got my rate lock in with amp before they went and gouged every one

 

Buzzards

 

Just one thing to be aware of. AMP reports to APRA on the calendar year, not the financial year.
This means that whatever targets APRA sets, AMP has to meet them 6 months earlier than every other lender. Dec 31 instead of June 30.

If you recall APRA Round 1, AMP lifted I/O variablerates by 47bpts for settled deals, and 100 bpts for pipeline / unsettled deals. Then a few weeks later they simply withdrew from I/O lending altogether for @ 3 or 4 months. They took these aggressive steps at the time because they had half the time everyone else had to meet APRA's requirements

I said on these forums at the time, that every other lender would be where AMP was ( rate wise) within 12 months. Was poo poo'd for saying so, but if you look at what followed, every other bank lifted rates 45 bpts or thereabouts, in either 2 or 3 bite sized increments over the following 12 months. Result? They all basically ended up where AMP was.

So here we are at APRA Round 2 , and that same commentary about what will or wont follow is going back n forth. I said a few weeks ago when AMP reduced LVR's to 70% that it would quite likely be the first of more reductions, and that it may well be a benchmark that gives a fair indication as to what may follow from other lenders in the coming months...

Now, considering AMP arent anywhere near as overweight in I/O lending today as they were then ( 3 years ago) but have still deemed this necessary, that gives me real pause. I dont share the view of others who have posted here, that AMP are somehow an exception or a one off. In fact, I believe many brokers and investors on these forums are seriously underestimating the severity of the pull back that's going to be required to get from current I/O volumes to 30% from July 1 .

Now, before poo pooing the argument , consider that in the last 3 years, APRA Round 1 has resulted in industry wide I/O volumes falling from @mid 50% to @mid 40%. Some lenders are well above 40%, some are under the 30% target already. But APRA has stated that the industry is sitting at mid 40%ish. And they now need to fall to 30%. Give that a moment to marinate. In 3 years, APRA Round 1 resulted in I/O volumes dropping from mid 50% to mid 40% of all lending. And now they have to get to 30%. That's twice as big a pull back, and it has to be achieved in one third of the time. Again.... twice as big a reduction required in one third of the time.....

So while 50% LVR's may not "seem" like they could happen across all lenders ... if you were a lender that needed to go on a "crash diet" to drop a whooooooooole lot of I/O weight really really fast, well...... I'm just saying....

Not trying to be alarmist. I just think people need to get real about what the 30% APRA quota is going to mean for some lenders.

 

Are Investment and Owner Occupied combined structured loans also affected? i.e I have both o/o and IP loan with AMP collateralised together.

 

Yes

 

MyState just reduced to 50% LVR as well.

 

At the end of the day, nothing changes in terms of action - you do what you can, while you can, and when you can't , you don't.

If it were to come to this, property investment would close to end. No equity releases for deposits. Not many investors I see can put in a 50% deposit and even if they could, they wouldnt want too.

Share markets will have their day in the sun because investors are gonna invest.

We just roll with the punches and do what we can. No point crying about the good old days, work with what 'is' and you'll be well placed for if/when the finance taps get turned back on.

 

Not sure the taps are ever really going to be turned back on - not fully anyway. 30% quota will be with us for a good few years at least. Dropping the I/O weight will require a severe pullback - which is what we are seeing with these dramatic short term LVR measures and rate hikes. Maintaining the lower weight wont require anything but sensible maintenance... But thats the best we can really hope for in regards to taps being turned back on.

But with specific regard to LVR's, the 50% LVR's such as AMP and mystate, and anyone else who may follow, it will be a short term /medium term thing to meet the immediate short term need of getting below the 30% quota. I expect that after everyone gets to 30%, LVR's will certainly increase again , but I think the cost of I/O will end up being @ 1% higher than P&I- possibly more. Max I/O terms will be 5 years. Refinances of I/O loans to other lenders will be near impossible, and DSR servicing levels for I/O lending will go the way of SMSF for example, where 1.25 is required, or 1.5 is required. So running investment portfolios on 3-4% yields just isnt going to cut it anymore. Still very much the decade to get some cash flow into any sized portfolio and deleverage

 

I didn't see that in their email? Just a pricing tier of 70%?

 

Yeah, my bad. New pricing tier, not a cap

 

I would put in a 50% deposit for a good deal. Why not? The investment would be cashflow positive from day one, which is my goal with all my properties anyway.

 

Not if you borrowed that 50%