CBA stops refinances of Investment Home Loans

Good post, and I like the analogy - only comment i'd make is that the cars wouldnt all end in the same place at the same time. 10% of $400bn is much different to 10% of a $50bn loan book. This is why we're seeing the play for owner occupier loans.

 

My thoughts?
It's because the banks have specifically been told by APRA to not grow their Investor lending by more than 10%. That's why there's the push to get to 10% (to maximise the limits on investor lending) and then everybody is going for the OO lending...

Once investor lending is locked in, then the lenders can push up investor lending rates as it gets difficult to shift these loans to other lenders. Its actually quite clever....

 

No speed limit on O/Occ P&I lending. Extremely competitive space now, with many banks making very very very skinny margins ... and that's why I/O borrowers are getting gouged/subsidising P&I borrowers - to get the overall NIM back to where the banks need it to be for their share prices to stay where they want them...

 

Proportionally speaking , they are all effectively required to travel at the same speed, and therefore all arrive at the same end result ... call it a rev limiter or an engine speed limiter if you prefer. You get the idea

 

Sounds like its a good time to fix those variable IO loans!

 

3 months ago it was, when they were 4% ish. Now, if you are planning on holding several years, they look OK but not WOW!

My clients have alot of NRAS though, with no intention of selling for 10 years, so we have been utilising 3 and 4 and 5 year rates for quite some time...

 

Agreed. But that's human nature. Most people (and I dare say that even more so among bankers) thinking is: "why catch 1 bird this month and another bird next month when I can get both birds this month"?

 

I read that somewhere in the Pacific there's an island with no trees on it, but evidence that it was once forested. It's now barren due to humans. Makes you wonder what some guy was thinking about when he was chopping down that last tree? Probably that he needs to get the wood before the next guy does.

I'm guilty of this myself, I think most people who are self employed or remunerated based on performance face this problem. Lots of work, never enough time but we keep on taking more on. The problem is I've been through times like the GFC when there was very little business going around and I was starting to be worried about being able to pay the bills. A lean time or two gives you the mentality of get what's in front of you because tomorrow you might not have anything.

 

At first thought - yes. But then you realise that once they have investors on their books, they are more often than not - captive. Very hard to refinance out. So rushing to fill your quota isnt futile.
These guys dont make 8 or 9 billion per annum in profits by being silly.

 

Yes... my contract is due to finish at the end of April and i'd be completely happy to not work in May and June as I have a big capital gain so regardless of job or no job, this will be a bigger tax paying year than normal.

However I will possibly get another contract to work in another team here, and it seems very likely something has just fallen into my lap (i'm in the right place at the right time). At this stage I'm planning to accept if they offer it to me, but it means I don't get that break that I wanted.

Generally speaking, I'd rather be in work than without work, I.e. "make hay while the sun shines", but the tradeoff is I won't get that great long holiday that I want....
Yes, sure I could get work after a holiday, but there's the uncertainty factor to consider.

 

Interesting read. CBA dropping brokers who don't send them enough business. Obv, no more refinancing loans for investors which will exacerbate these droppings. Thoughts?

'What CBA is doing is saying, if you're not using us enough, you can't use us at all'

 

I don't really see why CBA are worth using for the average client unless you are doing a top up.

They have a small amount of niches, but other than that they should generally be avoided.

 

They've actually had this policy in place for many years. I have no idea of stats, but for the most part it hasn't been talked about much since it was introduced. I assume they haven't enforced it much until recently.

Westpac also has a similar requirement.

It's really not that hard to meet their volume requirement. I'm not a real fan of either CBA or Westpac, but it's not difficult to find decent reasons to write a loan with them. For a lot of clients it's a simple top up of an existing loan. They do have some policy niches and their serviceability is better than most for investors.

Even when I was starting out and not writing significant numbers of loans, it wasn't hard to find a deal or two every 6 months where the CBA was the natural fit.

The brokers that are affected by this are either deliberately avoiding the CBA (so it shouldn't really matter to them), or are only doing very small volumes of business in general (perhaps they need to get serious about what they're doing).

 

As Peter has said, this has been around for years - and it makes sense.

In the end CBA isn't going to want to have people selling their products who haven't had any interactions with them for 6+ months because this becomes a potential liability to them. As a brand you will want people who know your policies, procedures and products inside out, and if they only write a loan once a year or less they will likely not have this knowledge.

In reality they don't just kick you off, they'd make you aware that currently not doing any business with them and work out why this is the case.

Any broker who hasn't written a deal or two in 6 months with CBA isn't a broker doing a real business and wouldn't necessarily have the knowledge and understanding to provide 10/10 service.

 

Was That APRA slap has been a long time coming....

 

Oh I very much disagree with that statement ... but each to their own.

 

i see no reason to write business with CBA unless for one of their niches such as multiple units on one title or first home buyers.

I avoid them as much as possible

But there are apparently broker groups out that that solely write loans with CBA - they don't use anyone else. That can't be in the best interests of the client.

 

For an investor, CBA has had better tools to succeed than most:

• Desktop vals at call, whenever you want - in my opinion, generally a touch higher across the board.
• Good policy, decent calculator.
• Lots of niches, but overall a great flexible policy in general.
• Easy equity pulls at 80%.
• Equity pulls right after settlement possible.
• Seamless top up process - money in your account within a week.
• Unlimited splits, multiple offsets per loan.
• Best tech platform of anyone (bar maybe ANZ).
• The valuation + cash out policy makes them rolls royce in terms of investor combo than others. Not many have this level of control (Westpac are v.good here too).

They're not the largest because they're the cheapest. They have the tools to match. Especially for investors.

I wouldn't go far as to say if you don't write loans with CBA your not a broker - there's plenty that specialise in different types of lending, etc. But a clear knowledge of each lenders tools for investors, CBA IMO comes out on top. The flexibility of their policy offers a lot of opportunity to use finance to get you further.

In recent times, verification has become a little tougher given they need a few extra docs than most (banking credits). The stop of investor refinances does make it far tougher to utilise for some too.

 

I've used CBA a lot in the past - their all round package has been very difficult to beat for investors, especially in LMI. Less so now though.

 

Does the refi limitation also apply to redraws?