Grab a coffee it’s only a 3 minute read.
1. APRA is concerned about an over-heated property market in Sydney and to a lesser extent Melbourne and so are punishing property investors Australia-wide.
Western Australia, the top half of Queensland and Darwin are not over-heated, in some cases declining and South Australia and Tasmania are ticking along nicely.
2. The banks have been told to reduce Interest Only lending to 30% of the market so expect to pay more for Interest Only loans.
3. The banks have been told to restrict the growth in investor lending to no more that 10% per annum so investors can expect to pay more than owner-occupiers.
4. The banks have been told to restrain lending growth to higher risk loans e.g. high LVR, high loan to income loans and Interest Only loans over 5 years.
5. APRA and the banks are encouraging Principal and Interest lending even if sophisticated investors have a proven Interest Only strategy.
6. Banks and brokers are required to scrutinise cost of living declarations closely.
7. Most lenders have a qualifying rate of between 7 and 8% to ensure borrowers can afford loans if interest rates rise in the future.
Things to remember.
1. Australia is not one property market; it is a multitude of markets so averages are misleading.
2. Beware the press beat ups.
3. Interest Rates are still at all time lows.
4. Lenders (especially the non-banks) are still open for business, it’s just a tougher environment at the moment.
5. Allow plenty of time as the loan approval process is generally more closely analysed and takes longer.
What should I do?
1. Review you loan portfolio regularly – lenders have better rates for new business.
2. Do not put all your eggs in one basket, use multiple lenders.
3. Don’t over-commit, this has always been the case.
4. Have a buffer, a fighting fund.
5. Pay down as much as you can while interest rates are low.
6. Use an offset account to reduce your daily interest cost.
7. If Interest Only has been your strategy over time and it works for you, stick to it.
Every borrower’s circumstances are different so if you would like a personal Finance Health Check tailored to you please feel free to email me or call me 0409 02 99 22 for a chat.
Read this article for more information on the changes.
We are here to help you navigate through the fog.