Westpac returns investor LVR to 90%.

Must say I don't use Westpac much and haven't been to a lender session with them post APRA so I am not sure. Also haven't heard much about them from other sources.

But that is the thing about CBA, so big that by growing by 10% they were adding as much Inv loans to their books as NAB at 14%. Seems we have similar info on NAB. AMP were over 50% and all they could do was cease loans.

Macquarie heard were much more % growth at the time than 15% (...and they may not have made massive policy changes, but they previously were perched as having as amongst the most competive rates to not so much for investment loans. So reasons for using them for investment loans have plunged.

 

With some lenders this is definitely the case already. Others it makes no difference.

 

My CBA contacts have indicated they never had much to be concerned about in the first place. It makes sense as for years the CBA has been just outside the market for investor loans, especially anything over 80% LVR. They've always been fairly good, but there's always been someone else that was just a little better at a certain price point or LVR.

Now they're making up for that with their pricing and are aggressively going after investment lending. What's quite telling is they're offering slightly better discounts for investment loans than for owner occupied loans.

 

Westpac have just announced they're bringing neg gearing back - people might actually service with them now!

 

......and Negative Gearing is back. Westpac's numbers have been hammered so they are bring all of sexy back, 90% LVR, lower HEM's and negative gearing.

 

You know what though guys.... this all ends up being swings and roundabouts though... in the end, each lender ( well, ADI's at least) has a speed limit. So once its reached, it will be a case of doing just enough to write decent volumes, but not enough to stand out from the crowd and invite APRA's wrath.. None of the ADI's will be able to stay out ahead of the market indefinitely , servicing capacity wise... We've just seen one lender who had borrowing capacity advantage - Teachers Mutual , pull the AMP trick and withdraw from investment lending completely because they've got to get under the speed limits again...

But every now and then, when they have a little spare capacity, one lender or another will do a quick pricing special to get enough business in to get back to their limits, and then pull the reins in again.

We have seen several examples of this already... Right now it's Westpac and STG wanting to fill their speed limit before the end of the financial year... and earlier it was Suncorp, a I'm sure there will be others before too long... this is just how its going to be now for I/O lending.

So the only area right now where no speed limits exist, and where ongoing ( rather than flash sale) discounts, specials, incentives, whatever you wish to call them, are available.... is PPOR P&I lending. And very simply that's because that's the end game for lenders right now... get P&I lending UP and keep APRA happy and hopefully off their backs ... ultimately resulting (hopefully) in no further pressure from APRA to tighten the noose significantly further in 2016 and 2017...

Now completely separate to the two big agenda items APRA is pushing - P&I v I/O re balancing , and the ramping up tier 1 capital ratio's , there is another issue to consider. And that's the upcoming cost of funds issue for lenders throughout 2017 as they transition to different RMBS funding arrangements.

For those who dont know what that means , banks dont have enough money to fund all the mortgages and other debt that they issue... so they raise it offshore through securitisation. They issue RMBS - Residential Mortgage backed Securities as bonds... And they often borrow a lot of that money on 90 day or 180 day terms ( as its far cheaper than borrowing it for 2 years or 3 years) , then refinance it after 90 or 180 days , then repeat, then repeat .... and so on...

Well that's looking likely to change by 2018. APRA, based on the BASEL committees recommendations, have indicated that they will more than likely require the banks to use minimum terms of 12 months for funding arrangements from 2018. Lessons from the GFC are at play here. This is designed to act a buffer against a future credit crunch... where securitisation markets might for example, close down for 3 or 6 or 9 months , and lenders might not be able to either borrow money or rollover existing funding... which could lead to them becoming basket cases , or at best... rudderless, unable to get money to lend at all... Obviously if Australian banks have a large percentage of their funding structured this way and cant roll over that funding because the securitisation markets are closed for business for 3,6 9, months , that carries risk. So the idea is that by forcing lenders into minimum 12 month rollovers, the chances of banks getting badly caught in the event markets closed for a short period, is dramatically reduced...

So while all of this is all still under discussion by APRA and the banks at this stage, we know its very likely coming at some stage before 2018, and we also know that longer term funding costs more than short term funding , so its pretty logical to conclude that funding costs will therefore increase. By exactly how much is hard to say for certain, and ultimately that answer is going to be influenced by what the securitisation markets want to price longer term RMBS terms at.

My call on this ... we will see probably@ 20-30 bpts increases to cost of funds as a result of the banks transitioning to longer term funding arrangements - perhaps a little less if the securitisation markets dont get greedy, and from that we will probably see the banks make investors carry the majority of that burden... so even with 1 or 2 more RBA cuts, I/O rates will likely end up not much lower than current rates for I/O lending , but P&I ( on PPOR especially ) will be down in the low 3's. That's what Im getting at when I say P&I PPOR will likely enjoy the best lending conditions ever in the coming years...

 

Is ease of equity release changed? Perhaps this can only get guessed as things play out...

 

Well if what you says pans out, other thing I think will happen would be much more attractive fixed rates v variable. You want a great rate with a 3 in it, then fine, but prepare to lock in for 5-10 years. This is largely how the US market operates.

 

Qudos Bank - the renamed Qantas Credit Union, who until 4 weeks ago were still taking actuals to 90% LVR I/O, and then reduced to 80% LVR for investors ( but still with "actuals" ) - has now dropped to 65% for I/O lending ..... still taking "actuals" though.....

Swings and roundabouts - Qudos dropping LVR's just as Westpac and STG restore LVR's.... but all policy roads still leading to and from the same place; APRA town.

We can now consider this the new norm. short term I/O specials from one lender or another, whether it be rate of LVR based, the lender getting inundated with lots of I/O business before pulling back for a while until some I/O capacity returns.... then another short term I/O special so they can fill up to their speed limits again.... then withdraw for several months ... then repeat.

 

Could explain why we got told a few days ago that St George wasn't lending to ANY expats for their portfolio loans.

- St George bank no longer lending to hard working Aussie expats

However I've since heard from a broker that it may not be the case at all and only applies to self employed people......how could the St George staff member get this so wrong?

As for the serviceability......I had the phone jockey at St George trying to tell us our USA Tax calculation on our income was $A200k.....wtf?? No wonder your serviceability calculator was red flagging the deal (its closer to $US80k for state and federal, and city is deductible against federal).

I'm still waiting to hear back on Monday but have some serious questions about St George and their ability to be there "in the tough times"....if they are this bad in the "great times".

 

Effective from the 26th April the Westpac Group announced that the max LVR for expats earning foreign income is 70% and applications are only permitted for new purchases only.

There are no refinances or equity releases allowed.

Self employed foreign income is not allowed - so if you are purchasing a property and are PAYG then no issues but if you are self employed then this is not permitted.

Also they are not accepting any foreign income for owner builder and portfolio loan applications.

 

My situation is PAYG, same company for 7 years......

Total BS that the phone jockey at St George could have gotten it this wrong.

Will be interesting to see what happens on Monday and also interesting that 48 hours later no one at St George social media has followed up to provide correction either.......

 

I thnk this is just being over complicated, and made to look fancy with their quoted percentages numbers etc.

APRA has simply enforced the rule to lenders to not exceed IHL growth by 10% p.a. Westpac have realised they are behind the growth targets, and can afford to relax some lending weights in order to recapture market share, and still maintain <10%p.a. lending book growth...

 

Hi Shahin.....I've just been told this morning that my post last week
- St George bank no longer lending to hard working Aussie expats is definitely the case, and the feedback given here that loan brokers could get around this isn't the case.

They are willing to lend us on a regular loan.....just not under the Portfolio Loan brand because of APRA weightings.... which is ridiculous.

 

Contacted my Westpac BDM today
Westpac servicing is so relaxing now, it uses actual existing loan repayment amount. ( not like CBA P&I)
PAYG income just need to provide payslips.
If the existing loan is not refinancing to Westpac, just have to declare existing loan amount.
Much better than it's cousin St George.

 

Plus negative gearing add backs now!

 

interesting! so it takes actuals on it's own debt? how does it assess OFI debt?

 

Westpac doesn't take just actuals - they do actuals plus loading however they do this on their existing debt as well which is good. Whereas other lenders treat their own debts at benchmarks.

Westpac servicing is so relaxing now, it uses actual existing loan repayment amount. ( not like CBA P&I)
PAYG income just need to provide payslips.
If the existing loan is not refinancing to Westpac, just have to declare existing loan amount.
Much better than it's cousin St George.

 

Westpac is hungry for business. I have just received below


Effective immediately, for clients who are on or about to be on parental leave for up to 12 months from their jobs, we are recognising their return to work income for new home or investment property loans and top up borrowing potential.

For loans drawing down during the parental leave period, we also need to confirm that clients have enough money to cover their monthly commitments during this time.

These changes apply to both new and existing customers with up to 90% LVR (inclusive of LMI).

Other ways we are also able to support families during parental leave are:

• Flexible payment options such as switching to Interest Only repayments for the period, restructuring other loan repayments or taking up reduced repayments (applicable after 12 months, for up to 12 months)
• From Monday 6 June 2016, we will also be able to waive the monthly fee on their Choice account for up to 12 months whilst they are on reduced income