Credit tightening cycle

We all know banks are dragging their feet in investment lending due to APRA. Heard some good advice on deleverage in the mean time until the purse strings are loosen again. Let's face it everything come in cycles.

So my question for those that has been around the block before. What signs should we keep an eye out for or flags from banks that lending standards has been loosened?

 

When you walk into a bank and someone throws a bucket of cash over you should be an encouraging sign.

 

The return of genuine low/no doc loans.
106% LVR loans.
Adverts for cash out (equity pulls) for consumer goods, cars & holidays.

 

If/when all of the things that have been tightened become more flexible again:

* Same rates for inv and o/o loans, which generally has been the case for past couple of decades
* more flexibility for i/o deals
* Lending again at over 90% LVR for those which no longer do this
* Serviceability calculators allowing current debt at actual repayments, negative gearing, less loading for new debt.....

Etc etc

 

Number one: Serviceability at actual repayments - this is the flood gate of borrowing capacity.

Everything else is just fluff which is at the later end of the credit expansion.

 

If we want signs you can pay close attention to market signals and have some guesstimates of where its heading.

The post APRA environment was signalled for about 6 months beforehand by the regulators - giving people that paid attention to the warning signs plenty of time to get their house in order.

I agree with Corey - but i'm not so sure we'll see that anytime soon.

 

Good tips all around. Looks like best preparation is repay debt now and focus on future serviceability. Cheers

 

I think it has been about as good as it was going to get, when banks are not lending enough, they will find ways to adjust.