APRA changes ?

https://www.theage.com.au/business/...scrap-key-home-loan-rule-20190522-p51q00.html

 

The new money you will be applying for will not be assessed as “actual” - only your existing non liberty debts will. IO or P&I won’t make any difference really. You’ll get a much lower rate for P&I though .

I think that rather than turning this into a credit proposal over an open forum , it’s best you engage a broker to do the pointy end of the work for you

You can take it offline with me or another broker ... get your borrowing capacity looked at and go from there

 

extremely miserable rental yield

 

and rate cut talks is just jawboning i think this might be a better strategy then firing with three guns same time at same target.

 

because they don't trust their own lending due diligence?

 

Perhaps if we rely just on this one factor, wages, but could add also future rent increases, income tax incentives, what do you think?

 

To those who said “new credit is here to stay”.....told you so

A couple of rate drops and servicing won’t be far from the “good old days”. Particularly for the ones who cause all the massive prices and that is emotional owner occupiers eho only care about “how much can I borrow and what will my repayments be”.

 

This is great news and cannot wait for July to roll in

 

Respectfully, I think you may be way overstating things. Yes, this has the potential to offer improved borrowing capacity to some borrowers , but it is a long long way from "actuals" and a long long way from ignoring IO in the equation.

Everyone is forgetting that the current floor rate of 7% has the letter P and the letter I attached to the end of it. Changing the 7.25% to 6.5% or 6.75% doesn't remove the P&I from the equation...

It's a step...and a welcome one, but its not a giant leap. Its still going to reward P&I/debt reduction and punish (by comparison) IO borrowers . The P&I part of the assessment rate means that doesnt change. And dont forget- NG gearing addbacks will fall away for investors if rate cuts follow, as well. So part of any advantage you may receive on one side of a servicing calc will quite likely be countered by losses on another area of servicing calcs...

Keep Calm... no one has seen how this will be rolled out yet- but its quite likely that it aint quite the revelation you think it is

 

I actually think this is the right move by CFR since there’s more at play than just property prices. The alternative is they do one, see how it goes, then another etc. However that path might not have the same jolt that’s required.

No guarantees with the current path either, but if property prices to start to rise uncontrollably, they could tinker at the edges (famous last words).

Whilst perhaps an unwanted consequence, I think higher property prices is the lesser of two evils, as recession is still a real risk IMO.

 

I appreciate we are on an investment forum but my post was aimed at majority of the market which is owner occupiers on P&I and no other OFI mortgage debt.

If any broker kept a servicing calc from 3 years ago I would be very interested to see how it stacks up against a 6% assessment rate which is what a 3.5% rate (conservative with 2 rate cuts) and the 2.5% buffer.

The “good old days” doesn’t just apply to investors

 

Everyone seems excited by the news.
I’m a believer that interest rates will stay low for a long time but what if they go up. Think about that for second.

 

By 2.5% no problem
Hopefully that does happen, means economy would be ticking over nicely.
Maybe after some wage and rental increases, coupled with some CG

 

We're talking about a 2%-3% increase for rates to go to 7%. Consider what needs to happen economically for rates to increase that much. A very, very strong economy, inflation both domestically and abroad, significant wage growth.

It would also take several years. In that time the inflation would filter through to wages in the hands of the home owner. Whilst the cost of living would also increase, most people would have the funds to cope with the higher rates by the time they got there.

Interest rates may come down quite quickly, but they tend to go up comparatively slowly. There's plenty of reasons to hope for rate increases because of the things than would occur first.

 

We have already acknowledged that this will aid O/Occ P&I borrowers with no existing debt. But people seem to think its gonna supercharge them. Its a false premise.... those borrowers have only had their capacity reduced by 10-15% by APRA., anyway, as their loans were previously always assessed at a new money buffer... . Its the withdrawal of investors from the market as a result of the removal of "actuals" that's pulled the real froth/air out of the sails... and that froth/air isnt being blown back into the sails by these changes...

Anyway...lets wait and see. Im sure there will be a sugar hit from this. I just dont think it will sustain itself because fundamentally not an awful lot is changing....

But if we get big rate cuts as well.... then maybe..... maybe.... it will have some legs.

 

If rates drop and mortgages are obtainable in the early to mid 3%'s, it makes a whole lot of sense to go P&I and pay the debt down as much as possible.

 

Sound thinking

 

Wow.
If that's the rates your on I would do some serious shopping around.

The only loan I have close to that is my SmSf. The rest are 150/200 basis cheaper

And if you are not on these rates and most half abled investors are no where near these rates why use such an extreme example?

 

Ironically many posters here I will not mention names said this is the new APRA post Apra....... Norm.

When I said things will change and cycle through. I was shot down shouted down

Now only months later the rules are about to change. The cycle is coming around. Hey even HEM calcs are making a come back

All this and members said it will not happen. Or not for years and years. And years

Not being smart this is the start. But the conversation here was that the new norm is here for good or extremely long time.

Hey...

 

@Redom

You have been consistently the most objective level head poster on PC in relation to finance thank you for your view insight and wealth of information.

Kind regards .