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credit tightning and its impact

Discussion in 'Property Finance' started by TheSackedWiggle, 26th Aug, 2015.

  1. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Just as easing of credit is directly proportional to price rise, tightening of it should has the inverse effect.

    Lvr % exponentially increase or decreases the borrowing power.

    Since we are coming from high lvr laons to a low lvr environment with serviceability becoming more stringent, assuming this tightening is here is stay for a while. What do seasoned investors/ brokers think about its impact on house price?
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    My clients haven't stopped buying! I'm experiencing an incredibly busy period - but it's only a tiny sample size. There's also been a lot of restructuring/equity releases too.

    Cheers

    Jamie
     
  3. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Jamie just curious, what % of these are investor loans?

    I have been looking in Canberra market and its boiling for last quarter or two, i was thinking the tightening should impact investors from here on? But may be not
     
  4. Redom

    Redom Mortgage Broker Business Member

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    Demand for housing is directly correlated with the ability to obtain credit, so this should definitely slow demand. Regulators know it, and its a large part of their rationale for changing.

    An expression used 'to cut the tops of the booms' - the 'tops' exhibit the most dangerous threats to financial stability.

    As for brokers, i'd guess Jamie's not the only one, this will likely increase broker demand. Confusion, bank changes, etc - make it a little harder to go solo if your looking to build outside vanilla situations.
     
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  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I've been extra busy too, but it is having a large effect on clients with more than a few properties - many cannot service for new loans and many would not qualify for what they have now either.
     
  6. larrylarry

    larrylarry Well-Known Member

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    That's why a good broker can really be helpful. Sometimes, I just can't understand why people want to go solo and get buried by papers. Always pay for good advice!
     
  7. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    I agree - it is busy and I'm noticing more purchases rather than less - lots of equity releases too, which ultimately result in more purchases.
    Pretty much 99% investors :)
     
  8. neK

    neK Well-Known Member

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    Yea Im finding myself in the same boat. Completely annoying!
    The banks don't like the idea of me extracting all this equity out based on my current income. Boo!

    @Mick C is helping me out and restructuring so that I can still borrow to buy another IP in the future.
     
  9. MGF

    MGF Well-Known Member

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    Those who cannot service for new loans - so they can't raise the deposit required and now are waiting (I presume) until they can?

    Those ones who would not qualify for what they have now... do you get the sense they're going elsewhere to try their luck?
     
  10. larrylarry

    larrylarry Well-Known Member

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    Do the lending restrictions vary according to different states? If the restrictions apply to all properties all over Australia, as property investors, where can they go?
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Its not the deposit aspect, but the servicing that is holding these clients back.

    Some have no where else to go and many have equity built up but are unable to use it - without selling.
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No - bank policy across the board.
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Into shares!
     
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  14. larrylarry

    larrylarry Well-Known Member

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    Thanks Terry. I guess there's a lot of reading up on sharemarket if one is not attuned to shares. :)
     
  15. MGF

    MGF Well-Known Member

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    Is this negatively geared properties? The charges on the loan aren't being covered by rent?

    Sorry for all the questions - I'm very interested to hear from someone on the front lines so to speak. I've seen APRA's changes be referred to as 'wet lettuce' regulation so it's interesting to see that perhaps it has much more of an effect than people are saying.
     
  16. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Majority are investors. Lots are buying up in QLD.

    There's a good mix of local clients too- lots of FHB's and upgraders.

    Cheers

    Jamie
     
  17. Azazel

    Azazel Well-Known Member

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    Still plenty of areas that look like better value than Sydney.
    Better fundamentals than BNE in my opinion.
     
  18. mcarthur

    mcarthur Well-Known Member

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    I'd debate the latter but not the former :D. Higher average entry than many parts of Brisbane.
     
  19. neK

    neK Well-Known Member

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    For me, all my IPs are positively geared.

    They don't like the level of debt I currently have (even though I can service them at higher interest rates).

    They would like to see a big serviceability buffer. Meeting their current serviceability criteria + $1 isn't sufficient. They want their current serviceability criteria + $1,000 (as its assessor's discretion).

    They said they would approve if i was actually buying an IP right now, but because its for equity extract, they are knocking me back. I've already got about $300k in equity that has already been knocked back :(

    What effect does this have on the current market? Probably bugger all. First time investors who have equity in their PPR can still easily extract equity. Those are the ones who are fuelling the fire in my opinion.

    I was probably going to sit on the equity until an opportunity presented itself... which is zero at present in the Sydney market.
     
  20. Azazel

    Azazel Well-Known Member

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    Yep, I think that's why there's plenty of people heading for the cheapies outside Brisbane.