Are banks lending during COVID-19?

Agreed. Occupation and job security are going to be looked at a lot closer than they were at the start of the year. Valuation is going to be an interesting one. You would assume that banks will want to be a bit more conservative here with the downward pressures around. Banks own stress testing models predict 20% falls if severe recession so I don’t see why they would rely on a valuation in a rising market to determine how much collateral they have to give you your loan. Interesting time’s ahead.

 

jobs and valuation are totally irrelevant soon, there will be a period where the banks are effectively closed for borrowing, how long it last is anyone guess my guess will be 6 months, the full facade of business as usual will be there, application will lie dormant and not responded too for months,

Eventually at the back end of the year and when hopefully they have got through it, what you say above will be correct and it will be much harder but not impossible to get finance.

 

Why do you think they will be closed for borrowing? Many staff had already been working from home before this started and many others have transitioned to working from home. It should be able to continue running even if all self quarantined - but not sure how full valuations would be done

 

its nothing to do with their operational capacity.
the banks will all be pulled in soon, same as the central banks did to in any country impacted in 2008. the scale of this is beyond our comprehension , but it will pass, but not before a period where the banks have the shutters down for lending , this may not be for long tho who knows.

this is a very simple formula, understand 2008 (what happened outside Australia) and add steroids.

 

Maybe...

But maybe there will actually be such a low volume of requests for new property finance, as people are too scared to borrow, that banks will not need to take such drastic measures.

Also, unless stock levels (properties for sale) dries up almost completely, then banks are not going to want to send the market into a complete crash by refusing to lend, because the outcome of doing so would likely be worse than handing out a few loans to those that still have jobs and equity. Or for that fact, issuing a few high risk loans.
A broad crash in property would be an absolute disaster for the banks.

The government may pull them in, in fact they already have with regard to small business, to tell them that if they want access to cheap funds they need to keep lending.

 

I am finding no change in loan enquiries at the moment. There is actually an upturn in people wanting to refinance and people trying to access equity to get ready to invest in shares.

 

Another major with fixed rate reductions today ( they announced it Friday but released this to brokers this morning) . This time it's NAB

Besides the obviously crazy low fixed rates now available ( or very soon to be available) to Owner Occ P&I borowers, Investors willing to move to P&I are getting some pretty incredible fixed rate offers at the moment , too. Plenty of mid - high 2% offers around.

 

of course your not, nothing happens quickly , these things are death by thousand cuts,
i would expect no change for 4-6 weeks, but then a steady decline, measure that every month and see the difference, hopefully it wont be long

but i am strongly of opinion the banks will be very restricted for a period of time

 

They announced this last Friday
Commbank cutting 0

 

Interesting opinion, can I ask why you think this will be?

 

hi ,how things?
Can i put it to you, that i'm interested to know why you think it will be any different this time?

my opinion is purely based that is will be same this time, just likely to be worse

 

I can't answer that because I don't know what happened last time as I was not working in the industry nor had any exposure to it (as in I wasn't needing to apply for any credit during that time). So I'm interested to know what factors make you think it will be the same or worse as last time?

 

the forthcoming recession will be far worse than 2008, i am talking globally, for Australia it will be unprecedented and new to the system as 2008 was by comparison to this a mere hiccup.
in 2008 the banks in a lot of OECD countries had to be supported by government, and some backs went under.
the same will happen this time around, it has already started happening.

Until the dust settled and the government brought it under control the banks were totally constrained from new lending, and in fact called in borrowings. This lasted from a short period in some countries to countries like Ireland where it lasted 4+ years.

I believe the same will happen here, the length of the impact may not be for long, but they will be severely constrained for a period.

of course there will be mantra of stability, liquidity, business as usual, supporting business, solid fundamentals, etc etc, but credit does and will dry up. how long for is debatable Australia is well positioned to weather the storm better than most and probably will.

Of course i could be wrong, but the % call is we are going to see what happened elsewhere in the world in 07/08/09 happen here, and that is major reduction in credit availability.

 

Interesting, thanks for providing that perspective

 

Bluestone did last Thursday.

 

Bigger challenge will be with business lending, particularly with prospects of a lockdown happening.

 

Closed for borrowing might be a bit extreme, but who knows, I can see a certainly see few in a bit of trouble needing to take that stance.

 

Their is zero doubt in my mind that valuers are going to start to take a very conservative approach.

This more than anything will be the biggest upcoming challenge. Anyone purchasing without a pre-approval or STF clause has rocks in their head.