Many people here may not remember what happened almost 12 years ago during the GFC. Quite a few lenders found themselves unable to access funds due to a liquidity crisis. The lenders defaulted on their commitments, they passed the costs of those defaults onto their customers. Some lenders went under and the liquidators passed on costs to the borrowers to be able to pay creditors. In many cases, people weren't in a position to refinance for various reasons. Some were paying obscenely high rates for years after everything else recovered. Now after five years of APRA regulation we've seen people's borrowing power erode. In some cases servicing calculators allow people to borrow only 40% of what they could have using the same figures in 2015. The effect on investors has been profound. The lenders that have been outside of APRA regulation have been a bit of a saviour for many investors. They can lend more than the mainstream because they use alternate funding sources and don't come under APRA oversight. Their lending critiera has also tighened, but the likes of Liberty & Bluestone have come back into the market trying to compete with the mainstream. This month there's been two rate cuts. Most lenders passed the first on in full, this afternoon I had 17 emails from lenders regarding their response to last weeks rate cut, as well as what they're doing to help borrowers through the Coronavirus crisis. One stood out from Bluestone, here's the highlights... * Bluestone are increasing rates for new customers by 0.35%. Investment loading of 0.50% will also be applied to investment loans. * Maximum LVRs are being applied to all loans. * Cash out is being restricted to $30,000. * Certain industries are being excluded. Tourism, hospitality, entertainment, retail. * Numerous types of income are being excluded. Dividends, holiday and short rental, overtime, commissions, bonuses. Other mainstream lenders are talking about rate cuts, repayment holidays and hardship assistance. These guys are talking about rate increases and restricted lending. When some of the brokers that experienced the GFC indicate that they're nervous about non-conforming lenders and go on about exit strategies, this is what we're talking about. Right now I imagine that a lot of people's exit strategies have been invalidated as well. Refinancing isn't an option if you don't have a healthy source of income. A few weeks ago I was looking at Bluestone thinking that they were starting to look fairly friendly again. Today I'm thinking I'm glad I didn't go there and I've generally tried to avoid other non-conforming lenders. If history is any indicator, after the non-conforming lenders, it will be the neo-lenders and tech disruptors that will be next.