How long till APRA loosens their purse strings?

I think it is a good thing too.

 

Taku
This is where the tough get going, so we need to look outside the square if you can no longer service then you look at lenders that will look at you,

Start with RAMS lo doc, upto $750K , accountant sign off, and there are others. I know as an investor there are always challenges but just don't give up that is the key I guess.

Marisa

 

Thanks for the suggestions and encouragement @MTR. There certainly will be no giving up here. My new job (salary increase) starting February has given me some breathing space and can now keep borrowing more.

 

I have seen loose money then tight, then loose etc.

I too think it is better to be in between so it is more measured......as long as it is not crippling & it is far from that.

 

So which lenders are still "investor friendly" since APRA has put their broom through the place? I've heard Liberty will still take actual repayments for an external debts you hold?

Where are you brokers sending your clients post these changes?

Cheers

 

I am basically sending them to the same places as before, perhaps a few to the non bank lenders, but much the same.

 

Even after the changes, lenders are on a scale, that is probably living, that go from best to worse.

Whatever broker you use, should be able to determine who to go to next to meet your needs. Go to one of the forum ones if you do not have one already.

 

Good to hear.
Have you had to look at different lenders or been fairly straight forward?

 

Hi @Azazel,
To date, I have stuck with the majors. Will look at lower tier lenders as my investing progresses and my servicing is at capacity with the majors.

 

I heard that Heritage Bank have announced today LVR's for investor loans back to 90% from 80%. Changes are happening

 

The GFC tightening was not related to domestic regulation whatsoever. It was related solely to international securitisation and the shortage of money available. Australian banks mainly did four things post GFC , to ensure they could continue to attract funding;
1. they curtailed LVR's
2. "fringe" products like no doc, lo doc, 105% full doc essentially disappeared.
3. RBA rate cuts werent passed on in full. They also hiked rates, out of cycle with the RBA
4. They aggressively raised deposit rates, to attract enough balance sheet funding to cover the shortfalls from the wholesale securitisation markets.

Why?
1. because lenders couldnt find investors to buy the debt for the high LVR and fringe products via RMBS.
2. cost of funds blew out by as much as 150-200bpts.
3. if they hadnt..Australia would have has a credit crunch much like Europe and the US and housing would have collapsed.

AOFM even provided cornerstone investment of several billion worth of RMBS to jelp out 2nd tiers and non banks like Resi, Fmac, AMP, Adelaide, Bendigo, BOQ and others...

The securitisation markets re-opened within 18 months and spreads fell to pre GFC levels, and lending took off again, pretty much unimpeded. Some of those "fringe" products have even re-emerged, kind of... but lo doc aint really lo doc any more at the majority of lenders and 1 day ABN no doc is certainly not 1 day ABN no doc anymore. Why? because lenders still find it difficult to find investors to take that kind of product in a new RMBS issue. But there is no shortgage of global money around for the product range currently on offer in Australia, to be sure...



The APRA changes are completely different. This time, there is no shortage of money available, and this is not bank driven. This is regulator driven, and it is all about risk. Nothing else. Just banking system risk. APRA believes there has been a far too rapid build up of I/O debt on the banks balance sheets at high LVR's in recent years, that will likely never be paid off. APRA wants much more capital set aside by the banks to cover those risks. But APRA also wants lots of the debt moved to P&I and paid down. This is all for one reason - to protect against future shocks... such as a 2nd credit crunch. Imagine the risk to the Australian banks if there was a 2nd credit crunch and cost of funds below out by 150-200 bpts overnight, and you and I and every man and his dog had our I/O rates go up by 200 bpts overnight. At current levels of debt, that could be a catastrophe for many investors who have ignored sound cash flow management and invested speculatively for growth. It could lead to mass defaults and carnage to the banks balance sheets, and Australia would have to bail out its banks to the tune of hundreds of billions. Thats what APRA is guarding against.

So in a nutshell- dont expect to see APRA ( nor ASIC - who are behind the much stricter household expenditure measures being applied) to loosen the noose any time soon. It's only been 6-7 months since they took out the big stick, and those on here hoping for 2016 to bring some significant relief are going to be sorely sorely disappointed. Same for 2017, 18 and 19 and beyond. There will be a loosening of pricing for sure in 2016 - it was a short term measure only, but the game changer isnt the pricing- it's the new world of servicing- and it's incredibly unlikely the changes to servicing calculators will be reversed, loosened, softened or relaxed any time soon... not until significant inroads towards the banks balance sheet deleveraging has been achieved.

And dont forget - there's more tightening to come in 16/17 with BASEL IV. So expect to see more rate rises for investors, and expect to I/O refinances become much harder. Expect to see many investors forced to move to P&I as they cannot secure I/O refinances, and if you are smart, accept that you should consider a stronger focus on cash flow and debt reduction for the next few years... for all of this will pass in 7-8 years time and those who have spent that time deleveraging will be in the better position to take advantage of the next credit boom .

 

This is a great explanation @euro73. Thanks for the comments.

 

I am new but i could not agree more than the explanation given.

Cheers @euro73

 

@euro73 fantastic insight. Totally agree around serviceability, this will be the key issue in the short to medium term. Their are 95% investment LVR products on the market, cash/equity required will not be an issue.

Also I expect another round of hikes (similar to November) to cover cost of funding in the short term.

 

Focus needs to be on strategies to increase serviceability. In my case I've decided to pay out a novated car lease 18 months early just so I can increase serviceability. That will have an added benefit of allowing me to increase my savings each month.

I have plenty of cash to spare for deposits but the serviceability calculators now in use by Suncorp and then St George prevented me from moving forward with further IPs (even though I am investing for cashflow). Suncorp wouldn't allow me to release equity from my PPOR and St George were limited in terms of loan amount they would offer for me to buy another IP.

I won't know until May timeframe as to whether the above strategy actually works.

 

We're lucky there's even interest only in this country

 

Reducing C/Card limits, paying down personal loans or leases, reducing debt by making extra repayments etc... These are the strategies to focus on

Small increases to rental incomes arent going to offer much improvement. But attacking the items listed above will offer material improvement to capacity.

 

And here come the 2016 pricing reductions... AMP and Suncorp

MPA Lender Update - 14/1/2016

MPA Lender Update - 15/1/2016

 

I also heard Mortgage Mart have changed their servicing? Taking actuals now?

 

Yes yesterday or the day before.

Also got an email from Bankwest saying they will go to 98% for owner occ (incl LMI) I think it was 97% before.