Firstmac stronghold crumbles - removing actuals

Effective from Wednesday the 8th of October, the Firstmac assessment rate is to be applied to all mortgage loans (home loans and investment loans) for serviceability calculations.

Changes are detailed below:

• The Firstmac Assessment Rate remains unchanged at 7% pa
• A repayment buffer, or ‘stressed repayment’ will apply to other existing / ongoing mortgage repayments, and calculated using:
  • Firstmac assessment rate
  • The loan amount shown in A&L which is the facility limit, for example loan balance + amount available to redraw from the loan
  • A default loan term based on repayment type:
    • PI=30 year loan
    • IO=25 year

With Pepper and Firstmac gone - there isn't too many options left for those in tight positions post APRA.

 

I've got a handful of deals in the pipeline - key dates for everyone:
1. Applications submitted by Oct 8.
2. Settled by Nov 30.

 

Tighter and tighter it gets....

 

Was bound to happen - good while it lasted.

 

Potentially ....

Sh....it

Cliff

 

So will other banks follow suit?

 

Other banks are already like that, so people who's circumstances suited it were using Firstmac

 

They have followed other banks.

They were one of the last remaining taking OFI debt at actual. There might still be some small credit unions and mortgage managers - but their days are probably limited too.

Cheers

Jamie

 

Thanks guys.

 

Bring on GFC 2.0

 

can it get any worse?

 

Well it's not as global as you think it is.

 

It is.

 

Well, I think artificially restricting demand is actually good for the whole market. In Singapore there are many rounds if cooling measures, eg, 50% LVR for 2nd loan. 7% extra stamp duty for 2nd property etc. Prevents price from speculating too high by investors. Sit out and watch.

 

Ouch.

 

So how tight is tight. I keep on hearing about how stuffed we all are but if I am sitting at 80%LVR with a cash flow positive IP I should be okay to borrow again right?... right?

 

Not quite as simple as that.

Those definitely help, but you'll still need to show to the banks that you can afford to meet loan repayments. The affordability criteria used has been given a real whack for investors.

They're using a theoretical 'expense' level that is much higher. Its been buffered up on all the debt that you already have. For $1mill worth of debt, you're theoretical expense level has gone up by over $3k per month, a huge whack to your borrowing power.

 

what would the theoretical expense level on $1mil debt have been before the change?