CBA stops refinances of Investment Home Loans

Agree Rolf. What's your take on this?

 

so the houses will sit empty? most investors don't buy new properties, so it wouldn't have a major effect on supply at all.

 

I'm not sure what you mean by 'so the houses will sit empty?' but I can assure you plenty of investors buy new properties. Reason? Great depreciation. Where is your evidence that suggests investors don't buy new properties?

Example:

Say you have a population that currently requires 1,000,000 dwelling that is growing by 2% per year. That means you need another 20,000 dwellings per year to house the growing population.

Within that 1,000,000 dwellings there is currently 300,000 investment properties. I.e 30% of the population is renting. It is fair to assume that the additional 2% in population will live in a similar ratio. That is, of the 20,000 new dwellings required, 30% will need to be for renters. So 6,000 homes. Say if long term policies make property investing an unattractive medium and 30% investors pull out of the market, that would mean 1,800 less properties would be built.

1,800 less properties built for renters = lower supply = higher demand = more competion = higher rents.

 

But investor loans represent much higher % than OO loans according to AFR

 

I did think it odd there when they were absolutely open for investor business with 1.50% pa discounts and rebates for refi's and I was thinking this will last a month or so then it juts kept going and going and going!

Dont get between a banker and a sales target (bonus).

 

This is why it is concerning. Why is offer discounts and then effectively later close shop to the same type of loans they had previously been competing to get? Why not be choosy from the outset and have a more solid loan book?

 

This is the game. Firstly, there's a 10% speed limit. So you fill it up as fast as possible, using big discounts to get em in. Then you jack the rates up slowly, incrementally, to recover some of that margin - knowing that in most cases, borrowers cant refinance out as servicing elsewhere is tough going. Then, when you reach your limits, APRA comes and gives you a big smack and you take your foot off the gas for a while to get them off your back. While you are doing that, someone else ( Westpac for example) who have spent the last few months being relatively quiet, tune their servicing calc right back up and start offering big cash back incentives for new business... then they will eventually reach their speed limits, detune price and servicing calcs, and then it will be someone elses turn

Think of it like this - you have a 20 lane highway and every car has one lane. each car has to keep to an average speed of X. Some will gun it from the start, and slow down later down the road in order to maintain the average speed limit. Some will start slowly and wind up as they go... some will just plod along at exactly the speed limit for the whole journey. At any given time, the 20 cars are all traveling at slightly different speeds - some are accelerating. some are slowing down. some are just same old, same old. But in the end, they all end basically in the same place at the same time if they have observed the speed limit .

This is whats happening with lending. gas on. gas off. You'll continue to see lenders blitz the market for while to fill their quota, then back off... and you'll continue to see it all happening at different times, from different lenders. CBA are sidelined for now. Westpac were sidelined last year. AMP before them.

 

Good analogy. However it highlights the futility of banks rushing to meet their sales targets early.

 

Maybe...just maybe the penny has finally dropped that some f these banks are over exposed to an over hyped property market.

 

True. Our lending staff don't have separate targets for OO vs. IP lending, it all recognised the same at that level and simply called mortgage lending revenues. Perhaps that's a split out that should be in place. Any lender currently doing over 10% growth in Investment lending should be strongly incentivised to start looking at attracting borrowings by OO's, and advised to tone down their chase of investment lending.

 

Warren Buffett has said many times "Only when the tide goes out do you discover who's been swimming naked",plus one can watch all of the big4 banks AGM'S on their sites and from the way i understood the numbers they posted and after some experienced in the first quarter of 2009 during the lows of investors fear about the depth of the banking crisis up too the last AMG,there only fears were in the real value of property..

 

CBA risk management is always ahead of the pack, this move and Bankwest move with negative gearing is to risk off some of their loans and pass it on to other players.

A good indication properties price probably peak but there is always a last hurrah before things turn

 

Here you go. Exactly as predicted. Turn on the taps by offering great deals or servicing calcs to get investor lending volume in. Fill up to your APRA speed limit. Turn off the taps. Hike rates. Because its too difficult to for people to refinance - and most who can refinance wont refinance anyway due to apathy...... they can just keep doing this over and over - ie using investors to boost their profits and protect that share price no matter what. They wont be the last to do this, either. Slowly but surely, I/O will pay more and more to subsidise P&I products being sold at very skinny margins - there will absolutely be more of this to come. I/O will end up 1% dearer than P&I by the end of this year - or very close to it. The RBA can cut 50bpts and investors will likely see little or none of it Commonwealth Bank posts record half-year profit of $4.9b, hikes rates for property investors

 

Rate announcement - CommBank

 

AMP have joined the party today .

No INV property refi's from other lenders unless you give them the PPOR as well, starting tomorrow.
30 bpts increase for INV I/O and for O/Occ I/O
25 bpts increase for INV P&I
No change to O/Occ P&I.
70% Max LVR for new INV business - new purchases only . Cant be refinances
Bumping up their credit card assessment rate.

Who will be next?

 

Would I be right to say they aren't an ADI?

 

AMP is an ADI

 

Ahhh Ok. The policies make sense then.