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Smaller lenders are being affected by APRA as well

Discussion in 'Property Finance' started by Peter_Tersteeg, 17th Aug, 2015.

  1. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Teachers Mutual Bank indicated a few months ago that they were somewhat outside of the APRA regulatory changes, they haven't been on the radar. That changed this afternoon.

    On investment lending they're now instituting LVR caps at 85%, as well as servicing restrictions. The full article about it can be found here...

    http://www.theadviser.com.au/breaki..._medium=email&utm_content=newsflash17_08_2015

    This is barely a ripple in a large pond and these changes aren't even close to as drastic as some lenders. It does demonstrate however that running to small lenders isn't a definitive answer.
     
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  2. Phil_22

    Phil_22 Well-Known Member

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    @Peter_Tersteeg I work at one of the smaller lenders and I have it on good authority that APRA are looking at ADI's with assets > $1B

    What is getting reported in some circles and how some people see it going it isn't quite correct....

    APRA has asked ADI's with assets > $1B to reduce the growth component of Home Investment loans at no more that 10.9% PA.

    They haven't told the ADI's how to do this, the big 4 have obviously taken the price hike route, other's are looking at changes to LVR's in policy etc...

    Some of the smaller ADI's in and around the $1B in assets space are looking to grow other lending areas such as PPOR, PL's, Commercial lending etc... to minimise the impact of the APRA changes and therefore continue to write good Housing Investment numbers.

    Cheers,

    Phil
     
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  3. Redom

    Redom Mortgage Broker Business Member

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    @Phil_22 - thanks - great post.

    In terms of the bigger banks, they were told to do that in December's 'warning' letter (2014).

    Post Q1 data coming in, APRA appeared to go harder and force some changes, particularly on serviceability calculators for the big players.

    Didn't know about that arbitrary benchmark - great info.
     
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  4. r3ckless

    r3ckless Well-Known Member

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    thought i work out my borrowing capacity as i wanna get a ppor next. before apra it was $550k. now looking at 7.25% assessment and P&I servicing across the board, all I can borrow is $330k.

    APRA has killed it for us.
     
  5. JacM

    JacM VIC Buyer's Agent Business Member

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    Make sure you've got a knowledgeable broker going into bat for you. There may be factors that should be mentioned to the lender that you are unaware of that can improve your serviceability case.
     
  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    @Phil_22 the asset point of $1B is new information, but I agree, APRA has left the implementation on how to curb investment lending up to the individual lenders.

    In this example, Teachers Mutual Bank haven't announced any changes to their rates, but then many of their products aren't exactly competitive (although they're not looking too bad in the investment space after the recent investment rate rises).

    It does seem to me that once ANZ raised their rates, pretty much every lender out there decided to take the opportunity to follow, whether they needed this measure or not. It's not just the Big 4, almost every reasonably well known lender has adjusted their investment rates upwards to some degree.
     
  7. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Not all lenders are assessing external debt with that method. It's prudent on your behalf to use that method - but hopefully when it comes time for you to buy again there will still be some generous lenders around.

    Cheers

    Jamie
     
  8. Kangabanga

    Kangabanga Well-Known Member

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    When interest rates run back up to 7.25%, you'd be thanking APRA.
     
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  9. Redom

    Redom Mortgage Broker Business Member

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    IMO, the investor rate increase is APRA 'incentivising' the market to adjust. I assume its applied by adjusting capital requirements held against investor loan segments, and letting the cost increase be passed on by lenders.

    The uniformity of the increase suggests that APRA have dictated cost structures here and 'let lenders decide' whether to pass it on or not, but i highly doubt its individual banks moving on their own accord just based on reducing their investment book. Then it wouldn't be so uniform and you'd see some banks moving and others not (market dynamics).

    With regards to other policies, i'd assume APRA would review individual lenders balance sheets and ask for certain areas to be addressed (e.g. BW with high LVR loans). How its addressed would be up to the individual banks.
     
  10. MGF

    MGF Well-Known Member

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    Do that to twenty people who are at the auction next week and instead of bidding a property up to $550K you'll stop at $330K (or not much higher as someone with more money doesn't bid against themselves). House sells for less, decreased mortgage burden on buyer, systemic risk reduced.

    Short term you're not enjoying it but these moves will most likely reduce prices and risk across Australia. Unemployment surges, interest rates rise and in retrospect you could be very happy they stopped you going into debt $550K.