Happy news from APRA

Discussion in 'Loans & Mortgage Brokers' started by Dean Collins, 20th Jul, 2017.

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  1. Dean Collins

    Dean Collins Well-Known Member

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    Great news today from APRA
    http://www.smh.com.au/business/banking-and-finance/smiling-bankers-as-relief-share-rally-continues-after-benign-apra-decision-20170720-gxevde.html

    Pushing these requirements out to 2020 means your bankers are going to be a lot more willing to negotiate.

    Great timing as I have a fixed loan of $665,000 that's coming off fixed in a few weeks i'll be looking to move away from St George

    Whats the best rate currently for a <80% investment loan, 5 year fixed, P+I, that's currently being offered?

    I know ING is 4.49% but wondering if there is a better offer out there in the market with this APRA news.
     
  2. datto

    datto Well-Known Member

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    Might be good time to buy bank shares. Dividends aren't too far away as well.
     
  3. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    It's VERY difficult to service a loan with ING if you have multiple properties.
     
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  4. +men

    +men Well-Known Member

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    I don't understand how this "good news" affect the current lending market, please shed me some lights??
     
  5. Dean Collins

    Dean Collins Well-Known Member

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    Serviceability isnt an issue for us. Our LVR overall is only 57%.
    Across all 4 properties our shortfall per month is around $100 plus any major repairs (so around $6k pa) may go up a bit as looking to move from 3 year fixed IO to 5 year fixed P+I.
     
  6. Dean Collins

    Dean Collins Well-Known Member

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    Its good news because it was expected that APRA would require higher capital retention levels and faster......basically APRA have kicked this can down the road until 2020.
     
  7. tobe

    tobe Well-Known Member

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    Try running the numbers at 8% p & I and only using 65% of the gross rental income. Still $100pw shortfall?
     
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  8. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Having a fair bit of equity isn't going to improve serviceability.
     
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  9. Dean Collins

    Dean Collins Well-Known Member

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    it sort of does eg means property rent is high as a proportion of loan value (eg we purchased a while ago and actively paid down).
     
  10. Dean Collins

    Dean Collins Well-Known Member

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    Its currently $100pm not pw but interestingly our expenses are 32% of rent so it doesn't affect us that much.

    Though yep the 8% serviceability adds up (are you sure its that high? I've been using 7.25% in past years for APRA serviceability in my spreadsheets, I thought it was an industry figure and not per bank).I did have this as an issue with St George in 2015....they wanted to calculate our New York PPOR mortgage on 7.25%....even though it is a 30 year fixed at 3.5% and had 27 years to run. Westpac saw the wisdom of reason and took it as a fixed payment amount....which is why they got our last mortgage.

    But yep at 8% serviceability it is $66,421 or about $5,535pm instead of $100. This said because my wife an I are tight we actually paid down our mortgages more than that in the last 12 months so if they say serviceability is an issue we can document paying that off our principal each year for the last 3 to 4 years).
     
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  11. headsonbeds

    headsonbeds Well-Known Member

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    Does this take care of Basel?
     
  12. Dean Collins

    Dean Collins Well-Known Member

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    Its my understanding yes - though the article doesn't clarify that.

    Though Basel IV is 2020+..... eg. - BASEL IV | Banking & Insurance
     
  13. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    If you are looking for expat funded loans,its not easy.......

    ta

    rolf
     
  14. highlighter

    highlighter Well-Known Member

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    I suspect this is a response to the banks having come to the party in terms of upping their rates. and making a real effort to bring down their share of IO loans (which, I expect, will continue). APRA's probably comfortable with the proactive direction they've taken, and is probably happy to take a step back as long as the banks continue to reform. That's my guess anyway.
     
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  15. PandS

    PandS Well-Known Member

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    it is not it still costing banks more equity, it just it isn't as bad as the stock market factor for so banks rally.

    with that benign figure, the market doesn't have to worry about banks raising new equity so they cheer, they can up rate .1% and they got that new reserve money covered.

    but headwind still remain for them with slower lending grow due to tougher rules
    I expect it just initial optimism, the shares will fall back in the next couple of months
     
  16. tobe

    tobe Well-Known Member

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    7.25 is at the lower end for lenders 'plug' rates or sensitised rate. ING are conservative and are at the higher end with 8%.

    I'm surprised westpac did it and st George knocked it with the os loan.

    They are the same people. Credit policy is similar, with st George usually better with expat and foreign stuff.
     
  17. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Actually Westpac and St George have significantly different methodologies in determining servicing. In many cases I've found Westpac to be quite a bit more generous. Many of the policies are quite similar but their actual calculators are quite different in the way the assess existing debts. Westpac still uses actual repayment with a loading, whilst St George uses an assessment rate.

    Westpac's credit assessors are based in Adelaide, St George's are in Kogarah NSW.

    There is a lot of cross over especially in their outsourcing overseas, but there's a few significant differences as well.

    All that said, successfully getting a expat loan for anyone at the moment is a noteworthy event.
     
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  18. Redom

    Redom Mortgage Broker Business Plus Member

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    In coming to this decision, APRA run stress tests for the major banks each year to see how they hold up to different economic shocks. The majors stand up really well against these shock tests. You need something like a 40% drop in prices or double digit unemployment before you have banks falling over in Aus.

    IMO sticking to lower benchmarks is a good thing. There's little need to overdo it and cost the consumer more $ unnecessarily.

    It would be hard to justify major shocks to capital requirements when their own models show that the banks are 'unquestionably strong'. Its a subjective benchmark, so they can do what they want. But i think most people would agree that the chance of some the shock scenarios happening are very low and the modelled ability of the banks to withstand such shocks does show that they are quite resilient.