Macquarie modest tightening

Thank you APRA

 

I sure hope others don't follow with the 75% limit on rental income.

 

ANZ is already there, has been for a year or so.

 

My own research suggests it should be closer to 70%.

 

Shhh!

 

Oh, means tougher to get a loan

 

I know @Peter_Tersteeg and I have talked about this in the past but I still maintain if lenders want to get down to a granular level of rental income that a blanket percentage is not the best approach. Obviously it is the most simple to implement, but the costs of a brand new house and land package home versus a run down apartment is just not fair in comparison.

Some body corporate fees alone are worth the entire holding costs of a brand new home.

 

Thankfully this is only with Macquarie Bank, which haven't been on the radar of most investors since mid last year. The more concerning trend is other lenders reviewing this area and decreasing their rate of accepted rental income.

The other thing we're seeing is geographic rental caps. WA/Perth is getting hit with lower rental income % than other states now with a number of lenders - watch this space.

 

It's only 1 year since most lenders introduced changes to I/O lending capacity... some went harder than others right out of the gate - remember AMP? Westpac? St George?

Incrementally we have seen the majority of lenders arrive at the same place over time ... NAB are joining the 7.4% party as of 19 November. This change from Macquarie is just another incremental step in keeping with the general trend toward slowly choking off/slowing down I/O lending - or put another way - incentivising more of us to move to P&I lending...which is what APRA really wants, and is the end goal of all these policy changes .

Many of the PC community appear to still be in the denial or anger stage. Some are convinced that bargaining ( with "senior credit people" for example) will solve their woes, and for others the short bout of depression has already been replaced by an acceptance that this trend will continue .... its going nowhere...

One ray of sunshine is that Qudos Bank are back taking "actuals" to 80% LVR for I/O lending as of this week .... This is a real surprise, but I will make an early call now and predict that just like last year, when they offered the same policy, they will get flooded with I/O business and within @ 4 weeks they will do what they did last year and drop the policy... until next year, when they'll decide they have some capacity to write some more I/O and will offer the policy again for a short time.... so best get busy getting busy and get those Qudos deals in while you can - or wait 12 months for the next little window

 

@euro73 I love all your posts and think your one of the great contributors to this forum. I however am still calling optimism. Not now and maybe not in the next 1-2 years but at some point the reigns will loosen.

APRA is like a parent and banks are like a child. When you tell them off and give them a whack, they sulk in the corner for a while but give them time and their outside eating worms again.

Then again I often get told off from my wife for being forever glass half full. haha

 

Hope your prediction comes true because it'll be so good to buy in certain areas which I have placed in the backburner for the time being until the lending climate improves.

 

BASEL committee is the parent, and APRA is one of its children worldwide.... and worldwide all regulatory bodies and lenders are being moved from their post GFC positions towards far more substantial positions... less I/O lending. More P&I lending. More Tier 1 capital. less short term RMBS reliance. etc...

We havent even started the Basel IV processes yet.... you may be right but I doubt it

 

Mate you are a finance guru, I would likely suggest your position on the matter to be the likely outcome as opposed to my "everything will be OK positive outlook" haha

 

Im just calling it as it is taking shape on the horizon. I'm not predicting anything other the bleeding obvious I offers perhaps more insight than others because of my extensive banking background and I have contacts who work in senior roles in banks , but really, anyone can see this. Even blind Freddy.

The banks are saying it. The bond markets are saying it. The worlds central banks and regulators are saying it. In fact, we are already in the middle of the regulator driven transition and there's still denial its happening. It's almost funny.... except its not funny- its just sad, really....

What people are preferring to believe is that these changes are temporary , rather than accepting the changed credit environment is just 1 year into a multiple year transition...

We tend to have this thing in Australia because we avoided the GFC, where we think we are invincible and arent part of the global economy. 25 + years of uninterrupted prosperity creates an almost arrogant mindset where only a big shock will jolt some people out of their complacency or denial... Well we arent invincible, and we are part of the global economy, and the global daddy of regulators, the BASEL committee-- is telling all his children around the world to change the way things work... . Australia is well known as a nanny state - so do we really believe our prudential regulator is going to operate outside of , rather than in line with, BASEL . if anything, we will be a touch more conservative than BASEL is requiring....

Its entirely conceivable I'm wrong... and it will great for me if I am... I own a lot of property so unrestrained credit availability will just make me very rich as asset prices inflate and inflate.... but it could also implode our banks so I dont think the regulators will allow it

 

19.6% average costs across all our properties (2 and 3br apts in Sydney area) eg 80.4% available for loan servicing.

 

@euro73...I completely agree. This tightening is from Basel. It's worldwide, not just a domestic initiative and its not just something that affects Australian banking. I've listened to enough regulatory reporting staff members at CBA to know this. So we all have to get used to this new world.....

 

Good post @euro73. I think you may be onto something that this change is a reflection of further concerns.

APRA's turning up the dial again a small notch. Its only Macquarie, but that may be a case of one of the first movers on this small change rather than an anomoly.

Looks like they are still targeting servicing. Rental income shading, equity pulls, negative gearing add backs, seems to be the next dial up. Notably, all more specific to investors than other segments of the market.

 

Yep... just like last year...different lenders will move incrementally and at different times. Macquarie and NAB have both now made moves in the past week. One could argue NAB's is more significant. Thats a real niche thats been closed off now.... the last decent 90% I/O calc.

80% is the new 90% for a decent servicing calc now.