The lending market JUST turned.

View article here
Big four slash lending rates in lending rates in 'war' to boost profits and grab-back share

 

I think the question is how far sentiment has turned against the market. If people now believe the market is cooked this will have little impact.

 

I believe it is only “cooked” in Sydney and maybe Melbourne.

That leaves a lot of Australia that is not cooked

 

Yep...you should see the massive flow on in Brisbvegas by late next year....not only on the expensive houses....

 

Totally it will take time for sentiment to shift but bank behaviour and attitude is what I was referring to

 

I think thats reasonably fair summation of the current times (lending market turning), but pricing hasn't really been expensive or too prohibitive, its been policy and assessment rate buffers that are holding borrowers back (not price, IMO).

 

This is the point I am trying to make without much a success....well let me try again:

Lets assume a familty of 3 (2 adults and 1 kid) has a gross income of 150k. They want to buy a house for 875k in outer Sydney and want to borrow 800k.

Pre-APRA:

1. They would have been assessed at the actual rate of 4.5% plus a small margin. So they would be assessed at loan costing about 40k per annum plus they would have taken the 2k (20k pa) the family reports as their cost of living so a total of 72k...and even after taxes there will be some income left over.

Post-APRA

1. The family would be assessed at 7.5% P&I or about 72k per annum plus about 50k in living costs. This where after taxes they won't qualify.

This is just an example but it shows what is happening. And that people who could have bought a 850k home will no longer qualify..it affect the higher priced houses a lot more.

 

Wow, okay. I thought the APRA crackdown was isolated to the investor market and those wanting access to IO. Are OOs being hit also?

 

Yes serviceability is across the board.

The rates are much lower for OOs thought...brokers can clarify this....

 

You are right @sash - the apra and additional measures have bitten both for ppor and investors. The banks are now trying to work out how to back peddle without breaching apra and get more business (thus making more money). Its a pendulum swing. I recently had a dentist earning 700k told he could only borrow $500k for a beach house not $1m as he hoped. Every story is complex but when people on those incomes are getting their expectations halved its impacting the entire market but most markedly the expensive markets.

 

These changes are a double edged sword, it restricted investors, but also hurts home buyers. It creates a vacuum some sorts somewhere. The question is : has it addressed the housing affordability issue or not? It does cool down the sydSydand Melbourne markets, it also hurts the rest of the country. Let's assume if apra did not make these changes, will Sydney and Melbourne markets self regulate or correct themselves? Maybe, or maybe not.

 

I prefer the sledgehammer effect affecting both OOs and investors.

Less FHB and OO = more renters looking for accommodation = higher rent.

 

This why i reckon places like Brissie will take the affordability is unbelievable.

 

It would also mean prices will drop significantly in Sydney.

 

I think we agree on that front except the 'significantly' bit.

 

I like your way of thinking.
Also is this how banks thought when they hiked rates for all customers, not just new loans?

 

You've just outed yourself as an evil greedy landlord, preying on the poor souls who didn't buy before APRA tightening! Shame on you!

Spoiler

I like that bwahaha

 

Before APRA...the banks we willing to accept living costs given the customer...now they have guidelines built into the software.

Other difference was that a lot more them allowed actuals.....this is how I got to 1.8m with a conservative lender like APRA pre-APRA.