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Is it likely banks will create new products to fill the void?

Discussion in 'Property Finance' started by jaybean, 3rd Aug, 2015.

  1. jaybean

    jaybean Well-Known Member

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    Seems like a great opportunity for them to create new products to fill the void and make it a win win for everyone.

    For example instead of killing off equity releases, create a separate equity release product which charges another 1% on top with extra monthly fees etc.

    Playing the Devils advocate, instead of only taking away and trimming back, just find new ways to get our money. It would be worse than we have now but at least there would be options. Something is better than nothing. Win win at the end of the day.

    Is there any reason to think such products might hit the scene once they are finished with all these scale backs? Looking historically, have APRA changes ever lead to more innovation and new products?
     
    Last edited: 3rd Aug, 2015
  2. wombat777

    wombat777 Well-Known Member Premium Member

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    I like the logic. I don't think change will take long.

    I wonder if peer-to-peer lending will ever exist to the point that it is used for home and investment loans. That would disrupt the industry.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I don't think there's any void to be filled here. It's still possible to release equity and borrow money, only the qualifying criteria has been tightened up.

    A second lender isn't a solution (peer to peer or otherwise). Firstly they're also subject to regulation through either APRA or more likely ASIC. On implementation they'd want a second mortgage over the property and odds are the first lender isn't going to allow it.
     
  4. jaybean

    jaybean Well-Known Member

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    Aren't current rumors that APRA's next step will be to eliminate equity releases? Or maybe I've let some of the posters here rattle my cage a little too much:)
     
  5. Be Developer

    Be Developer Property Developer Business Member

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    APRA is trying to control excessive lending, not bank product!!
     
  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I can't see that equity releases will be eliminated but they'll certainly become limited. Here's what we do know:

    * ING has eliminated equity releases where the security property is an IP, but it can still be done against your own home.
    * A few lenders have limited LVRs to 80% for investment purposes, but that hasn't been limited to equity releases, purchasers were also included.
    * Additional lenders have increases their credit scoring against equity releases above 80%. You can still qualify for a 90% equity release, but it's much harder with these lenders.

    However for plenty of lenders, it's business as usual in this area.

    I can see scenarios where lenders only release equity to a total of 80% for any purpose. Whilst this would hobble the strategies of many investors, I can see the merit in this as a risk mitigation move. I can see the day when you can purchase an IP up to 90%, but lenders will want you to get this down to 80% and keep it there as quickly as possible.
     
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  7. euro73

    euro73 Well-Known Member Business Member

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    At the moment, provided you have a PPOR to put up as security - the AMP Master Limit will do the job very nicely. Up to 85% LVR with no questions asked, and this product ( again, as long as it's secured by your PPOR) isnt affected by the 47bpts rate rise with AMP. Well worth serious consideration - especially Sydney based investors for whom equity pulls may be quite juicy .
     
  8. Fargo

    Fargo Well-Known Member

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    There is nothing new about that, you can get products with a lower interest rate but a 1% line fee that varies depending on the loan limit the higher the limit (hence your LVR) the higher the line fee. I made the mistake of lowering the limit to reduce the rate, when I was expecting not to buy anymore property, but I doubt I could get it increased now. Higher fees would only reduce your serviceability.
     
  9. mcarthur

    mcarthur Well-Known Member

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    Ooo, the dreaded xcol :cool:...
     
  10. euro73

    euro73 Well-Known Member Business Member

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    No... this is strictly a cash out for deposits and costs. AMP wont accept an INV property as security so you cant X Coll.
     
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  11. Till Kingdom Come

    Till Kingdom Come Well-Known Member

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    What void? It will complicate their IT systems for an immaterial gain. They will spend more on IT enhancements than get any significant benefit from it.