CBA says its OK to sing I owe I owe, but no more IO on > 80 % is my woe

Plus they are reducing discounts for IO loans

 

anyone with a job dealing in LMI insurance should probably start looking for a career change...

 

Yes I think 80% LVR is the new norm for IO loans - or soon will be.

 

ahhhh - another day, another banking change to adjust too.

Cheers

Jamie

 

I better start selling down my shares in Genworth

But then again, maybe not.

 

They'll probably just require LMI on 80% lends soon enough..

 

Or on any loan, to protect themselves. Then banks can tell the govt they're fully protected.

 

People have had ample time to heed the warnings to extract equity and start working on improving their cash flows.... no one can say they havent been warned over and over and over again.

 

Bleh.. oh well, CBA are probably maxed out for me anyway.

 

Anything stopping the Banks, including CBA from relaxing those tightening measures next year when their loan books starting looking OK to APRA(less than 30% IO loans)?

 

I wasn't warned....... .....I am having a great laugh when I told people CBA were the worst bank to go with...watch them ratchet rates on I/O loans till people move their business or go P/I...most will have to go P/I....as they might not be able to refinance.....

Hi ho...hi ho...off to work I go.....

 

They will have to stay at I/O lending making up no more than 30% of total lending ...but its the aggressive steps to get there from the current levels that will be the most brutal. They are just about all in the mid 40% range as of today. So they need to call at least 25-30% of their current levels just to get close to meeting the 30% limit. So its going to get really rough, really soon. Once they are there though, they will just maintain their policy settings to stay there ...

So I would expect you will start to see a conga line of announcements in the coming days and weeks...lender after lender will savage and slash and cut their LVR's to shut out a big chunk of investors.... but once they reach the magic 30% , they slowly (very slowly) increase LVR's but with very strict barriers to entry. For example, much higher pricing and much tighter servicing for anything above 80% LVR.

Sadly, this is all so very obvious... has been for a very long time... Ive written about it very many times.

I recall the optimism after the first round of APRA intervention. "Oh, it will be short lived". "Oh, it wont stay around long" .... and I'm seeing that same hopefully but sadly wishful thinking again , this time around.

The blunt reality is that its not going to get easier any time soon. Its going to get much tougher. So it's this simple. If you are an investor ( and especially if you are investor with any PPOR debt ) and you are only fairly new/early into your INV portfolio journey, and I/O loans are keeping you afloat, you need to absolutely accept that you should remodel your entire portfolio as P&I, today...and crunch the numbers. That should lead you to a very simple conclusion, which is this. You need extra income so you can reduce debt, or you will be sidelined for many many years to come. Or worse, you may be unable to hold on and be forced to sell.

So if you dont see 10 or 15K payrises on the very near term horizon, or some other lottery win or windfall on the horizon ( youd need to be nostradamus) , and you dont wish to be placed in a position where you could potentially be forced to sell, get your equity out now before its impossible to get I/O releases above 70 or 80% or any LVR (cos that will be the next thing to go ) . get a cash cow while you still have servicing ( cos that's also going to get much worse before too long) and get yourself insulated against these permanent structural changes to the lending environment.

 

Highly unlikely given that the capital requirement ratios for the banking sector will increase from their 2016 levels of 9.3% to 10.5% by 2019.

 

Guess it's going to be difficult for the magazines to obtain interviews with people acquiring many properties post APRA intervention in a speedy manner. Well, guess it's slow and steady wins the race.

 

For last couple of years we have had house price growth even at the back of stagnant pay rise mostly due to Cheap and Easy home loans.

We will continue to have a jobless growth where productivity improvements are mostly the function of automation.
So stagnant salary is here to stay if you are lucky to hold the job that is.

So with home-loans getting costlier and no longer easy to get, with pay stagnation the new normal, what happen to House prices?

 

I wonder if the properties priced in the $200 to 300ks are the ones that may experience an increase by investors due to the 20% deposit requirements and the higher valued investment properties will tend to remain on the market alittle longer to move on.

 

@euro73 , thanks for that. Great summary and on target with your decade of deleveraging message.
I have been following things closely for the past few years and the low interest rate environment was the catalyst for me to buying a PPOR but at the same time knew this won't last for long so i've been preparing accordingly based on the calculations you mention in your post (P/I vs IO...).
Due to little wage growth and expected little wage growth in the future, my way around it has been to simply pump as much money as i could into my offset in order to save on PPOR debt interest and to have as large of a buffer as possible and to have a healthy LVR.

 

I hope so .


Cliff