Tick tock Apra pressures sending us back to pre deregulation 1996 days ?

20 years of pure unadultered growth in finance and lending, and now (albeit far too late!) they're trying to curb the excesses of the past and you're having a whinge?

Really, it's a bit much.

There are many other industries in Australia who have suffered because of the ridiculous misallocation of capital that came with deregulation. It's about time something is being done, and when the tap is reopened in the future, hopefully those people will have the foresight to direct the capital into avenues that will actually strengthen our nation, rather than using it to inflate the ego of every Trump/Packer wannabe

 

Quite funny to see the view that "whatever is the structure now must be the structure forever" and when it changes for any reason suddenly the word "socialist" is thrown out and dark mutterings of overreaching Government control.

I/O are an invented thing - we can expand them, restrict them, ban them depending on their effect. When ASIC looked into the loan market they found some fairly serious problems - including lenders doing their affordability sums on the entirely wrong loan term! There is also the problem of banks using their own made-up risk profiles than coincidentally allowed them to loan ever-increasing amounts to decreasingly credit-worthly borrowers.

And we have banks being approx 40% of our stock market and approx 70% of their loans are in the housing market.

So... not a "socialist" Government plot to ruin the party but long overdue regulation. If banks were truly treated as private businesses and did not have Government guarantee then perhaps they would be left to lend like fools and go bankrupt. But they're going to be bailed out or bailed in by the Government and that kind of action has serious consequences.

I personally know people who have been given insane loans under the old structure and it's frightening to think how many hundreds of thousands of times this may have been done. APRA can see a lot more data than we can so perhaps they're not stomping around just for fun.

 

APRA has been one of the best regulators globally. They have a principle based approach and they tend to look at the big picture. All they have asked the banks to do is ensure that Investor loans grow at 10% or less or the banks would be viewed as riskier. A riskier bank requires more capital.

 

http://www.theadviser.com.au/breaki...e_Adviser_Bulletin22_09_2015&utm_medium=email

 

That report is coming from one side of the coin. Whilst I feel there is an element of price gauging, the changes are having an impact. The move in changing the LVRs will have the biggest impact IMO and pricing a premium on past loans does seem a bit of a cash grab.

But, now is an opportunity for FHBs to get back into the market - who had previously been priced out.

Would of been nice to see APRA enforce that the interest premium on I/P loans is returned via discounts to O/O loans.

Jeremy

 

+1

The idea that we must have 70% PPOR and 30% rentals has no basis in economic reality. It's just a hangover from another age in Australia and is not worth defending from what I can see. For us to develop into a competitive society we need to develop more flexibility, particularly when you have the outrageous cost of stamp duty hindering people's mobility. But there are two sides to that coin:

- For the young couples you mention with lots of IPs, they may have to get used to renting, just like a lot of other people (seriously considering this ourselves for the same reasons actually)
- We may have to develop more security of tenure for tenants eg longer leases
- Some balance has to be introduced to RTAs around the country where the interests of residential landlords get a look in and RIPs can operate on a more professional basis.

 

You are seeing that right now, Jeremy. Right now, today, if you are sub 80% and P&I, you are able to access the cheapest rates ever. Those lower P&I rates will eat into bank ROE, so will have to be "subsidised" by increases to I/O rates. The more the P&I discounting ramps up, the more likely it is you'll see additional "increases" to I/O rates - or put another way - less discounting for I/O and more discounting for P&I.

 

ING just announced they are increasing I/O rates by 37bpts from November 5 - but if you hold PPOR with them as well , the rate effect wont apply to you

 

If this article is correct - Westpac are going to be lifting rates in November

http://www.smh.com.au/business/bank...ash-profit-up-3-per-cent-20151013-gk8f8q.html