Well, the short answer is because the Banks are changing the rules around borrowing money, especially for investors, but also for owner-occupiers and first home buyers. And I believe some of these rules are so out of whack that they won’t stay for long.
So why aren’t we sending emails & newsletters – firstly a lot of the things that we have recommended in the past, may not hold true for the short-term future. For example – I have suggested Interest-only repayments for most of my clients, but no more – Principal & Interest repayment is the new flavor now. So we have to step back and re-evaluate the strategies that will be viable in short to medium term.
Secondly, the rules are so rapidly changing that one recommendation that might have been true last month may not be true this month. So, we don’t want to keep altering the strategies that we suggest, on a monthly basis.
We would like to stand back and let the dust settle for next month or so and then revisit the situation in January next year.
Why these changes now?
This is Australian Federal Government’s attempt to control the so called ‘Housing bubble’ that was being built in Australian Capital Cities – as per IMF and other credit agencies.
So they have used APRA to rein in the lending by applying stricter standards.
What are the changes?
The high level changes are – APRA has asked lenders to increase the amount of capital required to be held by lenders against residential mortgages. The way the lenders have applied this has meant the following changes for the borrowers:
- Lower LVRs for property purchase
- Higher interest rates for investment borrowings
- Existing loan commitments treated with more scrutiny – thus reducing your borrowing capacity
The changes are rapid and big, but I believe it’s a cycle the lenders go through and there will be adjustments to these rules as soon enough. There are lenders like AMP who pulled out of the investment lending completely in July this year and then came back in November – it’s a consolidation phase, which is required for all term growth in any market.
We will keep a close eye on these changes and come back with a summary early next year – hopefully with some solutions around these issues.