Loans

<html><body>
<p>Philip Lowe, the RBA Governor, has indicated the central bank's primary concern is employment, and those who don’t have a job and whose wages aren’t growing at sufficiently high rates. </p>

<p>"So to the extent that anything keeps me awake at night, that’s what worries me is the social and economic cost from a protracted period of unemployment. </p>

<p>"We know that low interest rates do push up asset prices, that’s part of the transmission mechanism. </p>

<p>"What would concern me, if we saw on the back of these rising asset prices, lending standards deteriorate and people go into the bank and borrowing ridiculous amounts of money in a speculative boom. </p>

<p>[smartcode_project:default project_id=29660]</p>

<p>"So this is why our focus is very much on making sure these lending standards remain sound because that would be a big problem if we saw a debt financed speculative boom in asset prices. </p>

<p>"We are not seeing that at the moment. </p>

<p>"The equity market is below its previous peaks, housing prices in Sydney and Melbourne, while they’re rising, they’re not really higher than they got to a little while back in some of the smaller capital cities. </p>

<p>[smartcode_project:default project_id=4939]</p>

<p>"In regional Australia housing prices are rising quickly, but there are fundamental factors at work here. </p>

<p>"So the issue is if prices are rising, are people borrowing responsibly and carefully? </p>

<p>"And to date they are," Philip Lowe concluded.</p>

<p>Lowe also warned that looser lending standards would increase the upward pressure on house prices and create financial risks.</p>

<p>“We are not at this point, but we are watching carefully,” he said.</p>
</body></html>

The RBA Governor Philip Lowe has said he would be worried if Australians started “borrowing ridiculous amounts of money” in a speculative way.



jchancellor

Don't borrow ridiculous amounts of money: RBA Governor's warning to home buyers

<html><body><p>Non-bank funders are looking to lend to apartment developers whose project starts were stalled across Melbourne during the pandemic.

"We are seeing the savvy developers doing what they can now to get their projects moving," Wingate managing director (property) Mark Harrison told Nine Entertainment.

But Harrison confirmed "a real distinction" between investor and owner-occupied product.

"The owner-occupier market is quite strong and we are funding quite a bit through the middle and inner-ring suburbs, driven by downsizers and people making lifestyle choices."

The big banks are mostly absent from the market, given their policies on pre-sales.

Pallas Capital chief investment officer Dan Gallen noted the banks often still had a requirement for onerously high levels of pre-sales.

"The banks have not moved with the times," Mr Gallen said.

"Developers are left in purgatory," he added.

Pallas Capital has extended $700 million of apartments across the major capital cities over the last three years, mostly via first mortgages, targeting upmarket developments in suburbs Malvern and Brighton in Melbourne.

"The market is certainly there, especially in the owner-occupier space," Mr Gallen said.

"We have had $150 million of loans repaid in the last three months from developers able to sell product."

The article noted MaxCap Group founder Brae Sokolski indicating its client developers were taking a position on the demand picture in 2022 and 2023.

"If net migration returns, we feel there will be a chronic housing shortage that will work in favour of developers with completed projects."

Sokolski noted funding conditions were especially working in favour of inner-city boutique developments, led by owner-occupiers.

MaxCap is backing the $45 million One Wilson Avenue project in Brunswick, consisting of 41 apartments being developed by Neometro and Milieu.</p></body></html>

Pallas Capital has had $150 million of loans repaid in the last three months from developers able to sell apartments

Non-bank lenders triggering apartment project restarts across Melbourne

<html><body>
<div>APRA's crackdown has skimmed skimmed the high LVR property investors out of the market, but there still exists a relatively high level of demand for investor credit from those with the requisite serviceability that remain. </div>
<div> </div>
<div>The ABS Lending Finance data series for February 2016 showed total lending finance across all measured sectors rebounding nicely in February, but against an underlying downtrend.</div>
<div> </div>
<div>That's in part due to the APRA effect, which has effectively stymied the outlandish surge in property investment demand. </div>
<p><a href="/images/2016/04/19/B4.jpg" target="_blank">Click to enlarge</a><br><img src="/images/2016/04/19/B4.jpg" alt=""></p>
<p> </p>
<div>Breaking out the data into its component parts and using the smoother trend figures we can see that despite a solid rebound in February commercial lending has apparently lost some of its momentum, which is potentially underwhelming news for business.<br><br>Of course, from month to month the underlying business lending figures are lumpy, and there's no getting away from that. <br><br>But for the moment, at least, the trend appears to be softening.</div>
<div> </div>
<div><a href="/images/2016/04/19/B5.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/04/19/B5.jpg" alt=""></div>
<p> </p>
<div>The figures for personal finance at first blush appear to be almost comically soft, declining to levels last seen in 2007. <br><br>However, I do wonder about classification issues here, given the massive and increasing popularity of mortgage buffers, offset accounts, and redraw facilities. Not really sure about this, but it looks muchos weird to me. Let's pass on that one, Magnus! <br><br>At the state level, commercial finance in rolling annual terms has been trending up marginally in Queensland, but down in Western Australia. However, the latest figures suggest that WA may have at least arrested its decline.</div>
<p><br><a href="/images/2016/04/19/B6.jpg" target="_blank">Click to enlarge</a><br><img src="/images/2016/04/19/B6.jpg" alt=""></p>
<div>Splitting out the commercial finance data by industry it is with no great surprise that we discover with that lending in the mining sector has been obliterated by about a third over the past year to be around 40 per cent below its peak.</div>
<div> </div>
<div><a href="/images/2016/04/19/B3.jpg" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/04/19/B3.jpg" alt=""></div>
<p> </p>
<div>Fortunately mining is only one part of Australian industry, and other sectors have fared considerably better, with business lending rates tracking at record lows.</div>
<p><br><strong><span style="text-decoration: underline;">Property investment loans</span></strong><br><br></p>
<div>Macroprudential tools have been deployed in order to cap property investor credit growth at 10 per cent, while the RBA disclosed some of its <a href="https://www.rba.gov.au/information/foi/disclosure-log/pdf/141515.pdf" target="_blank">thought processes</a> in this regard this week - interesting insights indeed (imagine having your emails disclosed like that in the public domain, by the way!).</div>
<div> </div>
<div>These moves have had the desired effect, and the focus has very much shifted towards owner-occupier lending. </div>
<div> </div>
<div>That said the seasonally adjusted February Housing Finance data showed investment loans rebounding by +4.1 per cent in February to $11.9 billion, so there is still a reasonably high volume of investor activity in the post. </div>
<div> </div>
<div>Indeed, investor loans are steadying across most states in February when looked at in rolling annual terms. <br><br>That said, activity in Western Australia was down by 20 per cent in February from the prior year comparative result, so there is possibly still some decline to come there, although a few analysts have already called the market bottom for Perth. </div>
<p><a href="/images/2016/04/19/B1.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/04/19/B1.jpg" alt=""></p>
<p> </p>
<div>Investor activity in the Northern Territory has fallen to such a low level at about $46 million per month that it wouldn't even register as a blip on the above chart. The February result was down by 43 percent from one year ago, so the trend line is shaping as if participating in a race to the bottom.</div>
<p><a href="/images/2016/04/19/B2.jpg" target="_blank"> Click to enlarge</a></p>
<p><img src="/images/2016/04/19/B2.jpg" alt=""></p>
<p><br><span>Not looking all that grand for Darwin, tbh!</span></p>
<div>
<strong><span style="text-decoration: underline;"><br></span></strong><strong><span style="text-decoration: underline;">The wrap</span></strong>
</div>
<div> </div>
<div>A decent rebound for Lending Finance in February, but there looks to be a softening tending in business finance. </div>
<div> </div>
<div>Monthly investor lending activity looks to be steadying in New South Wales ($4 billion), Victoria ($2.6 billion), and Queensland ($1.5 billion), though there is still some potential softness in evidence elsewhere.<br><br>With some banks having offered fixed rate home loans as low as 3.99 per cent, anecdotally there was a strong month of owner-occupier lending in March.</div>
<div> </div>
<div>
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
</div>
</body></html>

pwargent-M4siyDbqQY

Property investment loans already bottoming out: Pete Wargent

<html><body><div class="page" title="Page 1">
<div class="section">
<p><span>GUEST OBSERVER</span></p>
<p><span>The March housing finance approvals came in largely in line with expectations, with essentially steady owner occupier activity and a slight firming in the value of investor loans.</span></p>
<p><span>The number of owner occupier finance approvals dipped 0.9 percent mth in line with Westpac’s –1 percent call. Ex refi, the number of ‘new loans’ was a bit softer, down 1.6 percent mth.</span></p>
<p><span>Note that the abrupt slowdown in Australia’s housing markets in the second half of last year was mainly driven by a rapid cooling in investor activity following a tightening in credit conditions and rates for investor loans in response to a tightening in prudential guidelines and increased capital targets from regulators. Owner occupier activity was a lot steadier through this period with the number of loans still growth in annual terms, up 3.8 percent yr.</span></p>
<p><span>Accordingly there continues to be more focus on the investor lending numbers in the finance approvals data. Although these are not included in the headline figure on the number of approvals, the value of investor loans is recorded and included in estimates of the 'total value' of housing loans. For March the value of investor loans was up 1.5 percent mth after a 3.1 percent gain in February.</span></p>
<p><span>Though still down 13 percent yr, investor activity has clearly firmed a touch in early 2016. This may account for the firmer tone in other housing market indicators such as auction clearance rates and price growth. Buyer sentiment lifted following the RBA's rate cut in May but remains at a subdued level compared to previous years. Notably, the pick up in price growth in April appears to have accelerated in May with the month to date figures from CoreLogic RP Data showing surprisingly strong gains.</span></p>
<p><span>Elsewhere in the finance approvals detail, construction-related finance approvals were again weak, down 5.9 percent mth and 11.7 percent over the last 3mths. Within this segment, finance approvals for the purchase of newly built dwellings, which covers owner occupier purchases of 'off the plan' units, are down 11.1 percent mth and 23 percent since Dec. Although this could reflect shifts in demand it may also be an indication that buyers of 'off the plan' units more broadly are starting to encounter financing difficulties.</span></p>
<p><span>Approvals were a mixed bag by state. Owner occupier approvals ex refi were down across the board but showed slightly bigger falls in NSW (–2.2 percent), Vic (–2.7 percent) and Qld (–2.5 percent). Note that only owner occupier state figures are available at this stage with investor data due out May 13.</span></p>
<p><span><em><span>Matthew Hassan</span> is senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.</em></span></p>
</div>
</div></body></html>

jchancellor-FAypfDUnLy

Australian housing finance March 2016: Matthew Hassan

<html><body>
<p><span>GUEST OBSERVER</span></p>
<p><span>The Macquarie dictionary explains collateral as, “Security pledged for the payment of a loan” and to cross-collateralise is to pledge multiple securities for the payment of a loan or loans.</span></p>
<p><span>An Example :</span></p>
<p><span>1. Property A is owned by Person A</span></p>
<p><span>2. Person A wishes to buy Property B but has no money for deposit.</span></p>
<p><span>3. Person A buys Property B with 100 percent loan and the Bank holds Property A and Property B as security against loan for Property B. Property A &amp; B are said to be cross-collateralised.</span></p>
<p><span>In 95 percent of cases cross-collateralising is not beneficial to the borrower, it favours the bank, cross-collateralisation isn’t a problem until it becomes a problem, and then untangling it can be a long, expensive and traumatising experience. People loose fortunes both in real time, money and opportunities as a result of cross-collateralised structures.</span></p>
<p><span>Ten disadvantages of Cross-Collateralising your property portfolio…</span></p>
<p><span>#1. When you sell a property in a cross-collateralised structure you may not see any of the funds as the bank may request some or all of it to go back in against the existing loans to strengthen their position. They don’t need your permission either. Picture this you’re releasing one of your properties for an opportunity or worse still a bind, and the bank deducts funds to strengthen their position. Where would that leave you? I have seen this happen to some very asset strong and successful property investors. Answer given, Bank Policy!</span></p>
<p><span>#2. When you sell a property you have to resign all of the existing mortgages. Extra unnecessary paperwork.</span></p>
<p><span>#3. You can loose product selection and control by being with just the one bank. For example the bank can say no more interest only loans for you, we want you to take a Principle and Interest loan from now on, to reduce your debt with us. This is quite common when your borrowing levels get up with the one funder.</span><span style="line-height: 1.3em;"> </span></p>
<p><span>#4. Bank holds far more security than often necessary, for example Property A worth $800 000 is used to buy property B for $250000. The bank has $1 050 000 of assets against $250k of loans. The result is that the bank holds all of your cards.</span></p>
<p><span>#5. Buying across state boarders you are subject to mortgage document stamp duty of that state, this in itself is OK, but when you have other properties as security for the purchase, regardless of the state they are in you may have to pay the mortgage document stamp duty on the entire loan amount, rather than just on your purchase price. For example, purchase property A worth $300,000 in QLD but for whatever reason you have offered another property as security and it is worth $500,000 in the ACT, you would have to pay mortgage document stamp duty on the whole portfolio of $800,000 and this is because the entire mortgage document has to be stamped in QLD. </span></p>
<p><span>This duty is a state duty and is different in every state or territory. An example of the difference in the amount payable can be, where the stamp duty is $4 in a thousand, for the cross-collateralised mortgage document stamp duty you are up for approximately $3,200, but if you had your purchase as a ‘stand alone’ loan you will have to pay approximately $1,200 . If you need to find out more about this point, please give us a call.</span></p>
<p><span>#6. Having at least two lenders gives you the flexibility of playing one off against the other, giving you more choice an ultimately more control.</span></p>
<p><span>#7. If you want to realise some increased equity when properties have grown in value you need to have your whole portfolio revalued (multiple valuations instead of one, again an additional and unnecessary cost).</span></p>
<p><span>#8. You can run out of borrowing capacity with one lender when you reach their maximum serviceability / exposure levels.</span></p>
<p><span>#9. It is so much harder to move banks, if you no longer like or agree with their service or lack of.</span><span style="line-height: 1.3em;"> </span></p>
<p><span>#10. If you have cashflow problems, your whole portfolio is at risk. Better risk management from your respect is to not cross.</span></p>
<p><span>There are numerous more reasons why not to cross-collateralise, especially if you have a business with Overdrafts / partners / Fixed and Floating Charges etc, there are also simple ways to combat the banks having too much security with financial instruments like Deposits under Lien and secondary funders. An experienced Mortgage/Finance broker can help you with structuring advice specific to your own needs, and keep <strong>you</strong> in control of <strong>your</strong> assets.</span></p>
<p><span> </span></p>
<p><em>Peter Tersteeg is mortgage broker, Sage Lending Solutions and can be <a href="https://www.sagelending.com.au" target="_blank">contacted here</a>.</em></p>
</body></html>

Property 101: Cross-collateral loans

<html><body>
<p>In making serviceability assessments of borrowers, most ADIs currently use a methodology in which they calculate the borrower’s Net Income Surplus (NIS).</p>
<p>Computing NIS is a multi-faceted calculation, with a number of different inputs, and for which the relative importance of each input is not always clear.</p>
<p>Assessing the relative prudence of NIS assessments across ADIs can therefore be problematic, as it can be difficult to determine the extent to which one conservative assumption outweighs another less- conservative assumption, and apparent minor differences in methodology can sometimes have a significant impact on the overall outcome.</p>
<p>To assess and compare lending standards across ADIs, one technique used by APRA has been a Hypothetical Borrower Exercise (HBE).</p>
<p>In early 2015, APRA asked a number of the larger ADIs to provide their serviceability assessments for four hypothetical mortgage borrowers — two owner-occupiers and two investors — using their policies in place as at 31 December 2014. This allowed APRA to compare the lending decisions of ADIs based on identical borrower characteristics. Importantly, it also allowed APRA to disassemble assessments into their component parts. In May 2015, APRA outlined some results and conclusions from the first HBE.<sup id="mortgagefn1back"><a href="https://www.apra.gov.au/Insight/Pages/insight-issue1-2016#mortgagefn1"><br></a></sup></p>
<p>To test how lending policies had changed in response to APRA’s scrutiny, APRA ran a second HBE in late 2015, based on the policies ADIs had in place as at 30 September 2015. By asking the same population of ADIs to assess the same four hypothetical borrowers, not only could APRA compare across ADIs, it could also compare the same ADI at two different points in time.</p>
<p>The four charts below relate to the four calculation components for one of the hypothetical borrowers — in this case, a ‘typical’ investor. The blue bars show the results for December 2014, while the red dots show the September 2015 results for the same lender. Each chart is sorted with the most conservative lender for that particular component (as at September 2015) on the left, and the least conservative on the right.</p>
<div id="chart" class="resize">
<h4>Chart A - Income recognised (less tax and haircuts)</h4>
<p>Percentage of gross pre-tax income</p>
</div>
<div class="resize"><a href="/images/2016/03/23/2016-insight-issue1-mort-chart1.gif" target="_blank">Click to enlarge</a></div>
<div class="resize"><img src="/images/2016/03/23/2016-insight-issue1-mort-chart1.gif" alt=""></div>
<div class="resize"> </div>
<div class="resize"><sup>Bars represent individual lender data </sup></div>
<div id="chart">
<h4>Chart B - Minimum living expense assumptions</h4>
<p>Percentage of borrower pre-tax salary income </p>
</div>
<div><a href="/images/2016/03/23/2016-insight-issue1-mort-chart2.gif" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/03/23/2016-insight-issue1-mort-chart2.gif" alt=""></div>
<div> </div>
<div><sup>Bars represent individual lender data</sup></div>
<div class="clr"> </div>
<div id="chart">
<h4>Chart C - New mortgage</h4>
<p>Interest rate used in serviceability assessment</p>
</div>
<div><a href="/images/2016/03/23/2016-insight-issue1-mort-chart3.gif" target="_blank">Click to enlarge</a></div>
<div><img src="/images/2016/03/23/2016-insight-issue1-mort-chart3.gif" alt=""></div>
<div><sup>Bars represent individual lender data (Click to enlarge image)</sup></div>
<div id="chart">
<h4>Chart D - Existing mortgage</h4>
<p>Interest rate used in serviceability assessment</p>
<p><a href="/images/2016/03/23/2016-insight-issue1-mort-chart4.gif" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/03/23/2016-insight-issue1-mort-chart4.gif" alt=""></p>
<sup>Bars represent individual lender data<br>The current interest rate on the existing mortgage debt is 5.2%</sup>
</div>
<div class="clr"> </div>
<p>Chart A shows income recognised, as a percentage of gross pre-tax income.  While the assessment of PAYG salary income has usually remained the same between the two periods, a number of lenders have applied larger haircuts (i.e. discounts) to less stable sources of income such as overtime, bonuses, commissions, investment dividends and rental income.</p>
<p>Chart B shows minimum living expense assumptions as a percentage of pre-tax salary income.  Some lenders have made quite large changes to this component of their NIS assessment.  This impact has typically arisen from two main sources:</p>
<ul>
<li>considering borrower-declared expenses where these are greater than calculated benchmarks; and/or</li>
<li>scaling living expense assumptions in line with income.</li>
</ul>
<p>Chart C shows the interest rate used in the serviceability assessment for this new mortgage. Various lenders have increased that rate in response to APRA’s December 2014 letter, in which APRA stated that prudent serviceability policies should incorporate a ‘serviceability buffer of at least 2 percent above the loan product rate, with a minimum floor assessment rate of 7 percent.</p>
<p>Chart D shows the interest rate used in the serviceability assessment for an existing mortgage commitment. Here, the changes are even more dramatic than for Chart C, as at the time of the first HBE a number of ADIs were not using any serviceability buffer on existing debt.</p>
<p>These four components combine to calculate NIS. Whilst there was little overall change in NIS for the lenders that were already relatively conservative in December 2014, lenders that were the least conservative in December 2014 generally reported a significant drop in calculated NIS using their September 2015 policies. These changes had the effect of tightening the spread of calculated NIS from the most to the least conservative ADI. Overall, the maximum loan sizes reported by ADIs for the four hypothetical borrowers declined by, on average, around 12 per cent for investors and 6 per cent for owner-occupiers. (Note that this does not imply actual loan sizes are falling across the board; indeed the average size of loans continues to rise.)  </p>
<h3>Conclusion</h3>
<p>APRA’s HBEs have proven a simple but effective tool for examining the impact of changes to residential mortgage lending policies during 2015.  </p>
<p>Overall, debt serviceability assessments now appear to be both more prudent and more consistent across ADIs, relative to December 2014.  APRA will continue to engage ADIs on this issue in 2016 to assess whether the observed improvements in sound underwriting practices are maintained. APRA will also be examining the extent to which loans are able to be approved outside an ADI’s own (tightened) policy parameters.</p>
<div id="footnote">
<p><sup id="mortgagefn1"><span style="font-size: 12px; line-height: 1.3em;"> </span></sup></p>
</div>
</body></html>

po-LsXgBTHBmX

Property 101: APRA's loan serviceability methodologies 

<html><body><div class="page" title="Page 1">
<div class="layoutArea">
<div class="column">
<div class="page" title="Page 1">
<div class="layoutArea">
<div class="column">
<p align="LEFT"><span style="line-height: 1.3em;">In an interesting take on APRA’s directives, the banks are pricing investment loans to be more expensive than ’owner-occupied’ home loans, for new and existing home loans.</span></p>
<p><span>There may be some contention as to what category your loan falls under. Did you borrow against your home to invest ? How about if only 50% of your loan relates to an investment property? What if your home and your investment property were cross-collateralised?</span></p>
<p><span>With this interest rate disparity, it’s ever more important to get your lending structure spot-on. Tailored advice is now paramount given there are ways to ensure you are getting the best rate available. </span><span style="line-height: 1.3em;"> </span></p>
<p><span>For starters, having your home loan and investment loan at the same bank is now necessary unless you want to get slugged on the carded rate.</span></p>
<p><span>If you took out an investment loan to buy a property, which you have since moved into as your home, your broker should have been in touch with you by now regarding the suitability of asking the bank to re-classify your loan. Should it be appropriate, I reckon do it now before the mad rush in a couple of weeks. We have done our homework in advance - each bank will deal with this request differently.</span></p>
<p align="LEFT"><span style="line-height: 1.3em;">So here are the new Standard Variable Rates.</span><strong style="line-height: 1.3em;"> </strong><span style="line-height: 1.3em;">There’s not much difference in movement amongst the majors (not that I’m suggesting any opportunistic collusion). Hey, at least we can all be thankful that we all own part of the banks through our superfunds...</span></p>
<p><span><strong>ANZ (Owner Occd): 5.38%</strong> (CR 5.49%)*</span></p>
<p><span><strong>ANZ (Investment): 5.75% </strong>(CR 5.49%)*</span></p>
<p><span><strong>CBA (Owner Occd): 5.45% </strong>(CR 5.59%)*</span></p>
<p><span><strong>CBA (Investment): 5.86% </strong>(CR 5.86%)*</span></p>
<p align="LEFT"><strong style="line-height: 1.3em;">NAB (Owner Occd): 5.43% </strong><span style="line-height: 1.3em;">(CR 5.52%)*</span></p>
<p align="LEFT"><strong style="line-height: 1.3em;">NAB (Investment): 5.72% </strong><span style="line-height: 1.3em;">(CR 5.63%)*</span></p>
<p align="LEFT"><strong style="line-height: 1.3em;">WBC (Owner Occd): 5.48% </strong><span style="line-height: 1.3em;">(CR 5.62%)*</span></p>
<p align="LEFT"><strong style="line-height: 1.3em;">WBC (Investment): 5.89% </strong><span style="line-height: 1.3em;">(CR 5.89%)*</span></p>
<p align="LEFT"> <em style="line-height: 1.3em;">* CR is the Comparison Rate. It is a notional rate which includes fees (mainly the annual package fee of around $395) into the interest rate in well-intentioned yet child-like attempt to come up with a single rate which punters can use to estimate the true cost of a loan. It is based on a $150,000 mortgage and hence does not at all relate to you unless your mortgage is exactly $150,000 and you never use your offset account or Credit Card interest free terms</em></p>
<p><span>The Standard Variable Rates are of course lacking meaning without applying your lifetime discount. One bank might be giving you a 1% discount off this headline rate (that discount is so 2011), whilst a broker may negotiate an unpublished cracking lifetime discount of 1.45%. </span></p>
<p><span>You must always consider the upfront costs, ongoing fees and the ’after discount’ interest rate; then compare the loan products over a certain time frame (please don’t compare over 30 years, perhaps this is unrealistic). </span></p>
<p><span>We think a 10-year projection is appropriate, that way it’s also easy to divide by 10 to see the annual $ saving.</span></p>
<p><strong>Product Comparison – 10 Year Projection </strong></p>
<p><a href="/images/2015/08/14/Screen%20Shot%202015-08-14%20at%204.52.53%20PM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/08/14/Screen%20Shot%202015-08-14%20at%204.52.53%20PM.png" alt=""></span></p>
</div>
</div>
</div>
<p><span> <em>Jason Khoury is the principal at iChoice. He can be contacted <a href="mailto:jason@ichoice.com.au" target="_blank">here</a>.</em></span></p>
</div>
</div>
</div></body></html>

An interesting take on APRA’s directives: Jason Khoury

<html><body>
<p>The National Australia Bank will be raising variable mortgage rates on interest-only loans by 29 basis points.</p>
<p>NAB follows rivals ANZ and Commonwealth Bank of Australia in raising variable rates on loans for property bought for investment purposes by 27 basis points last week.</p>
<p>It will also apply to owner occupiers with interest only loans with NAB's rate increase adding about $70 to the monthly cost of a $300,000 interest-only mortgage.</p>
<p>Sources told Fairfax Media that NAB is constrained from charging different rates to investors and owner-occupiers because of technical problems. </p>
<p>NAB advised that interest only loans are the predominate structure for investors, and over the last three years housing investment loans had grown 34 per cent, while the number of interest only loans has risen 44 per cent.</p>
<p>The Australian Prudential Regulatory Authority (APRA) has asked banks to keep annual growth in investment home loans to below 10 percent in an attempt to cool red-hot property prices in Sydney and Melbourne.</p>
<p>NAB's interest-only rate changes will be effective August 10 for all new loans, while the change for existing interest only variable rate loans effective September 10.</p>
<p>Matt Comyn, group executive for CBA retail banking services says increasing rates was unavoidable to ensure the major bank remains within APRA’s 10% growth guideline. <br><br>“As Australia’s largest home lender, we support the prudential regulator’s actions to ensure lending practices remain sustainable and we have been actively managing our investment home loan portfolio to remain below the 10% growth limit," he said.</p>
<p>Matt Comryn says the new investment home loan variable rate of 5.72% was still 0.18% lower than the rate six months ago. </p>
</body></html>

NAB joins ANZ and CBA in higher interest rates for investors

<html><body>
<p>AFG, Australia’s largest mortgage broker, has reported i<span style="font-size: 12.1599998474121px; line-height: 1.3em;">nvestment loans moderated in NSW from 49.8% in May to 41.6% in June. </span></p>
<p><span style="font-size: 12.1599998474121px; line-height: 1.3em;">Investment loans had been running at an average of 49.5% of all loans in NSW for the previous 12 months.</span></p>
<p>Elsewhere in Australia, the same moderating trend was repeated, with investment loans declining in SA from 41.8% to 36.8%, in QLD from 36.1% to 34.1%, in VIC from 36.5% to 35.7% and in WA from 31.8% to 31.2%.</p>
<p>Brett McKeon, AFG managing director suggested the figures indicated that APRA controls are starting to take effect, but not at the expense of the overall mortgage market.</p>
<p>"If this trend continues, it should help allay concerns about overheating in Sydney, in particular, as investment levels there come back into line with the sustainable, long term, national average.”</p>
</body></html>

Loans

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Loans

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News