LOC the next Pain Point......

Why ?

Why would anyone change what they do because of a lenders offerings ?

 

I said I if they take away my LOCs, as in call them in, or force me to change them to a less flexible alternative.

I guess I should have said no 'additional' Australian property investing for me.

Australian property has only been attractive to me thanks to the ease and flexibility of finance AND the ability to refinance. Take those things away, and there are better investments out there for me.

 

Not Margaret? Shock Horror .

 

28%

 

I don't think banks would close down your savings account (offset) ?

 

Offsets are a transaction account so very unlikely....however LOC can be closed at will...

 

Even if funds have been used? Or are you talking about when people sit on them unused, purely to have the liquidity?

 

Some LOCs are at call. So a bank could, in theory, ask you to pay the money back within 30 days or so.

Borrowing under a term loan means you have a 30 year contract to pay back the money. Even if it is parked in an offset the lender generally cannot use it to pay the loan off unless you have defaulted on the loan - then they could.

 

Another nail in the coffin

 

The only way I see Oz property attractive is if you can continue to achieve growth, as yields are very poor

 

yields are still good in some markeys

 

Right, my guess is areas like Logan????? perhaps west Melb, though with prices going nuts this wont last too long.

Don't come to Perth if you want growth or good yields. WA..... wait awhile

 

Like everything, you have to look at all the detail and be aware of what is available elsewhere & there always seems to be another op if you keep searching.

Melb West is a CG hope and pray, yield has been shocking for long time, but what I consider shocking many think is fine.

 

*sigh* now up to 5.05..feels like it goes up every time i login

 

More pain to come.

 

More pain to come.

 

Re LOC rates, they should rise and be higher than normal SVR's given the type of product they are and the flexibility attached to them.

Re the next 'pain point' - i don't see this as a major risk in regulator eyes. The ROE for lenders with LOC's remain strong, its a product some borrowers want (relatively niche) and they've generally always been priced a bit higher than SVR products. This should continue. I'm not sure i see why banks would want to chop these and why anyone would be putting pressure on them to do so in the current climate. LOC's don't necessarily pose greater financial stability risks and to my knowledge, there hasn't been an obvious build up to suggest regulatory action is required here.

Typically LOC's become pain points when theres liquidity issues in funding markets that require lenders to scramble for funds. LOCs may be targeted in this environment. Not sure the current credit environment points to this arising anytime soon - if anything, much of the fin stability regulations that have been put in place since the GFC have 'protected' against liquidity risks arises.

 

Hi Terry, does the purpose of the loan change when you convert LOC to term loan. We have LOC drawn against PPOR which was used as deposit for IP, so interest on this LOC is deductible. If we switch LOC to a term loan (still secured against PPOR), does the interest remain deductible?

 

Many lenders require a full application to do so. Many will be road blocked due to servicing issues. LOC recalled and buffer gone!

 

Do a split of the original PPOR amount & the new term loan used for your IP (your LOC to term loan), the second one should be deductible depending on circumstances.