More good news ...

I think it seems fairly probable that with US treasury bond yields accelerating so quickly after Trump won, and with additional capital raising and other BASEL IV stuff probably resulting in another 30-45bpts increase in 2017 sometime, even if the RBA slashes the cash rate by 50bpts, the rate to borrower - what you and I and everyone else actually pays - isnt likely to get lower. All roads appear to be pointing to slightly more expensive money moving forward.

 

Yes they do. However, investors who plan ahead will be able to afford the increased payments when this happens. Investors who don't plan ahead could have problems.

 

And new lending is being assessed with all outstanding loans assumed to be at over 7% rates anyway, and HEMS (home living expenses) have a floor - so there shouldn't be mickey mouse expenses being accepted into serviceability calcs....

I think the risk is if lots of people suddenly lose jobs.

 

choo choo... all aboard the train...

Major bank raises investment property rates

 

Anyone care to share a summary of who has hiked rates?

 

I've just got a letter from Westpac.
They are increasing 2/3 of my IP loans. One by 0.08% and the other 0.12%.

Nothing from Commbank yet, but watching my mailbox closely.

 

I'd be very surprised if CBA doesn't follow with their variable rates in some way.

 

From our overnight database email;

• ANZ - 0.08 % increase on new and existing investment lending.
• NAB - 0.15% increase on new and existing investment lending.
• Westpac – 0.08% increase on interest only lending.
• St George – 0.08% increase on interest only lending.
• Suncorp – 0.15% increase on new and existing investment lending.
• CBA – yet to announce changes but expect a similar move soon.

 

Just to elaborate - 15bpts at STG/BOM for Portfolio, and 43bpts for SMSF

 

Over 20 lenders increased rates. Soon it will be a shorter list of who didn't

 

It doesnt really matter who has or hasnt yet, because they will all move up before long...

Forget any notion that they all do things at the same time. For at least 8 years now ( since the GFC) banks have moved rates up and down, out of cycle with the RBA - as they feel the need or the want to do so. ANZ doesnt even follow the RBA any more. They decide rates on Fridays.

The banks will do what they want, when they want - and with the royal commission seemingly a distant memory , no one can do anything about it other than to switch lenders if you can... but even then, as an investor wanting I/O terms, you are now considered a client to be fleeced.

The competition for I/O lending has been all but sucked out of the market. Non banks, who used to compete on niche or innovation, but whose servicing calc advantages have all been taken away, aren't any real competition at an I/O level any more.

We now have a situation where by and large, 80% of all business is at the big 4 - and for I/O investment lending in particular, many borrowers are either stuck or will be stuck after another purchase or two, because of changes to servicing calcs.... so banks will use them to subsidise O/Occ P&I - because many simply cant go elsewhere

I called it many months ago - at least 30-45bpts for I/O investors by end of 2017, followed by difficulties extending I/O terms... . The first 10-15 points is now in place. Fortunately we are coming off a low rate base so the changes shouldnt be too difficult to manage... but if you get a P&I double whammy, could get really tough really quickly for some.

Also called this a long time ago - its the decade to deleverage.

 

Or is it the decade to invest into other asset classes.

 

Or both.

 

well yes... possibly.... I have moved a few hundred K into the share market in the last few weeks.. so far santa's little trump rally has seen me up @ 5% up in 2 week, pre dividends. If that trend continued across a full year or five, I'd be a happy camper for sure! I dont trust the share market to do anything other be inconsistent, though. we shall see.

That being said... I get 15% tax free ( or better) return on equity on my capital invested , across my resi property portfolio, using that dreaded N R A S thingy people hate me discussing!! I get 25% tax free returns on equity on some of them, actually... And it enables rapid deleveraging as I build. Cant beat that in the markets ... But yes, for non NRAS investors with money parked in offset at 4(ish)%, some funds going into other asset classes might be worth exploring - especially if they are locking into fixed rates and their funds wont work in offset

 

Cba is also moving. Announced today, effective march 17. Wasn't clear how much they are moving.

 

We (CBA) are increasing our variable home loan rates for new and existing Investment Home Loans by 0.07% p.a. (7 basis points)

► We are increasing our VLOC rates for new and existing customers by 0.15% p.a. (15 basis points)

 

Any reason why they would wait till March? Why not next couple weeks?

 

They are increasing the SVR by 0.07% for only investment loans this Friday and next year they will be also differentiating interest only loans for both owner occupied and investment loans so we can expect them to increase Interest Only rates by another ~.10%.

 

Hopefully investors understand the impact of this and work towards rationalising debt, or whatever it takes to manage risk.
Am I the only one who thinks buying property in Australia needs to considered carefully as 2017 may be a game changer.

MTR