APRA changes ?

A couple did, but my wife objected so I let them down gently.

 

Agree, it was interesting listening to politicians on Saturday talking about needing to "Kick start wages"....not a single politician talked about keeping expenses low.

It concerns me how uncompetitive Australia is getting on the global market. You should be part of the Aussies inn the USA facebook group whe they talk about going home for holidays and are blown away on how expensive everything is (gas / food/ clothes etc).

Regulators should NOT be propping up housing market, we needed this slow down....you cant have year after year 10%+ price rises and the market should be left to sink for a few more years so regular wages/inflation can catch up.

This is just going to cause people to over leverage into McMansions not realising rates CAN AND WILL move more than 2.5% in the life of a 25 year mortgage.

We need more #Tier2Cities and we need them now. Until its just as cool to live in Nowra, Orange, Port Macquarie as it is Sydney, housing=expensive.

 

And this is why we need infrastructure.

Big interstates.

Big rail

Big water

Then you can move industries and jobs and migrants to the larger regionals.

But it's a 20-30 year plan and it is expensive, but it will set Australia up for another century at least Unfortunately , none of the current lot can see beyond 20-30 months - if that

 

You seem to have a chip on your shoulder. I agree @euro73 tends to rant and I can see why that grates some people, but I also recall very clearly @euro73 calling rate cuts in 2019 about 1.5 years ago.

 

https://www.smh.com.au/business/the...k-running-out-of-bullets-20190528-p51rty.html

 

https://www.smh.com.au/money/invest...-but-the-boom-s-not-back-20190524-p51qus.html

 

Hi guys, any more news on this topic? When are we likely to see these changes in practice? Thanks.

 

spoke with st george bdm yesterday, assessment rate going down 0.80%, to 6.45%, but HEM going up too.... Net gain is modest

 

So does any of the learned folks here know when these changes are likely to reflect in the calculators?

 

Shortly after they announce the policy changes. Whenever that is...

 

Trying to get businesses to drill down on costs and keep expenses low for households is a double edged sword, since labour costs are a decent portion of it .
Their employees are also their customers or customers to another business.
Less money in their employees pocket means less money for other businesses .
Many of the same businesses that were complaining a few years back about high labour costs are going under or really struggling due to consumer spending falling into a big hole.
Many households have seen increases everyear for many items and services, yet wages have gone no where.
Remember the axe the carbon tax and the big savings for households..
Were still having the same discussion but that was supposed to solve all the problems.

 

I’m still waiting for the $500 electricity saving Abbott and Hockey promised me.

 

My gut tells me the following will play out in the next few years if there's no material loosening in lending hurdles and/or the property market doesn't get stimulated by whatever the Govt's throwing at it:

• less people will be able to buy
• less people will sell or have to sell c/o interest rates
• OTP will get hammered and via media bombardment re: building quality, there won't be enough takers for new apartments. Instos will buy these apartments in bulk for a hefty discount from cash strapped developers and flood the rental market in the short term. But we are talking about the last batches of new apartments here because...
• supply of new properties will be down the toilet (already signs this is happening now)
  
• reduction in cash rate/interest rates will facilitate a floor in the property prices...but alone will not lead to price increases. However, if the stockmarket implodes, that might trigger a flight to perceived safety/quality ie property and we'll have a spike in house prices
• reduction in cash rate will stave off a deep recession, but there will be pain particularly in the construction industry, those affiliated with it and some knock-on effects on the broader economy eg brickies buy coffee and shop for clothes too etc but without enough income... This is exactly what's got the RBA s*** scared. They know it's coming. The cash rate may even fall below 0.50 if the banks don't play ball.
• migrant intake will be ramped up again

....and the end result, rents in the major cities (Sydney included) will increase significantly.

Eventually, rising rents and (consequently, house prices) will feed into CPI numbers and the RBA will be forced to get the cash rate off its historical lows.

 

Fair enough but for people on the line or close to it, even a small increase (after taking into account HEM increases) in borrowing capacity would help them get their first home or refinance existing loans.

 

So where are we up to?

This news first broke on May 21, where APRA suggested they were considering changes to APG223 . To cut to the core of the proposed changes, APRA wrote to lenders and said that ADIs would be permitted to review and set their own minimum interest rate floor for use in serviceability assessment. Specifically, "APRA will still expect ADIs to determine and keep under regular review their own level of floor rate, but ADIs will be able to choose a prudent level based on their own portfolio mix, risk appetite and other circumstances,” the letter read.

APRA looks to amend mortgage lending guidance - Mortgage Business

The media release went on to say that a four-week consultation will close on 18 June, ahead of APRA releasing a final version of the updated APG 223 shortly afterwards.

It's June 26 and we havent seen anything from APRA yet.... all we have seen so far is that Westpac appear to have jumped the gun last week with a "6.5% for some" announcement and got a slap on the wrist from APRA for being too eager. One would imagine that APRA's amendments to APG223 are not that far away.... maybe they are waiting until July 1? But really, right now absolutely nothing has changed on any servicing calc at any lender, and if the Westpac announcement and immediate un-announcement is any guide of what's to come, those hoping for a big injection of borrowing capacity across the board when the changes do eventually flow ,may end up being sorely disappointed,. So for those still going hard on the "i told you so" arguments about credit being back, maybe the original suggestion I made back in May to wait and see how this player out before getting too excited .
, had some merit.

Plenty of people who have cultivated big reputations here have gone all in on this. Seems that there are a lot of people looking to grasp onto any small announcement , any sale price, any clearance rate that isnt as bad as it was the week or month before, amplify it and turn it into some utopian prediction of the future, in order to try and prolong their denial of the new way of things - but wages are still going nowhere, delinquencies are up , lending data is still pretty soft and it's extremely unlikely this will be some cure all .

Instead, the lower rates coming our way should be looked at as a once in a lifetime opportunity to accelerate debt reduction.... I still believe this remains the decade to deleverage.

#cashcowsrule
#decadetodeleverage

 

4th of July.... still no word from APRA. We now have 2 rate cuts in play and no word on how the floating assessment rate of 2.5% will work....

So we wait.....

 

Do you think if rate cuts boost sentiment, APRA will change tact on this?
Anyone here work for a bank or APRA that can shed light on where this is at internally?

Edit: @Redom also, if you have any thoughts.

 

Pretty sure @euro73 was the one who said it'd be implemented within a few weeks. I'm not too sure why you thought this and are suggesting it may not be happening now.

It always appeared likely this was a matter of months, not weeks. They're regulators, not bankers or industry participants! I.e. a conservative bunch who are a little reactive/slow to implement change relative to other stakeholders in the economy.

Recall that in 2014, the serviceability changes were announced in December 2014. December! The first real move from lending was NAB and AMP in May 2015.

From my public policy experience, a public letter with specific wording changes to APG223 is a very very very strong indication that it's going to be done. Regulators are very conservative as a default position and a public letter out of the blew is a bold move. If they come out and say this is happening (big move), it's likely happening. They're also consulting with people who want it to happen, so I don't really see much opposition to changes. Perhaps bank risk teams may have something more here though.

Also I think overall, it's the smallest factor of any of the major changes of late. Allowing some borrowers to borrow 10% more isn't even in the same vicinity as drastic as 2 rate cuts and a $10 bn yearly fiscal stimulus package. Credit demand will cyclically increase because of these two (and government certainty, housing cycle, etc).

Together though, this is a 'wow' package IMO from the regulators. It's massive, targeted and geared towards the housing market (and equity) too.

@d_walsh - pretty sure no one from APRA can genuinely comment on progress (its market sensitive). I worked with the same people in 2014 on fin stability while at Treasury (Lonsdale was Snr at Treasury then, now the exec at APRA, Byres was head of APRA then). My general comment would be that it'd take a few months for changes to flow through.