Mortgage Update — The Investor Market Is In For A Shock
Keep your eyes on the ball!
Whether the sport is cricket, soccer, rugby, tennis, Aussie rules or any other ball sport, keeping your eyes on the ball is of utmost importance.
The same concept applies to home loan interest rates. The second you take your eyes off your home loan you could find yourself making a costly mistake.
If you took out a variable home loan more than 2 years ago, there is a great chance you are paying far too much interest!
The table below demonstrates my point.
The “Note” at the bottom of this table is correct. Lenders are keen to offer surprising discounts depending on your loan size and equity level.
Having a Smartline Mortgage Adviser is like having a coach. I can keep you focused, dedicated and on-track. As your “coach” I can make sure you get the best and most savvy results possible.
Imagine the comfort of knowing that your home loan is almost always competitive. No troublesome doubts that you might be paying too much. That is what I am offering you. The comfort of financial stability through my assistance in making well-informed choices.
The Investor Market is in for a Shock
MAJOR restrictions and changes are currently being introduced to Investment Loan Policy.
These changes will undoubtedly impact the residential property market by reducing the demand side of the price equation.
I am very surprised to see how little media attention has been given to these adjustments. I feel that you should all be aware of these changes in order to make informed decisions.
The Australian Prudential Regulation Authority (APRA) has established new policy settings that restrict the lending behaviour of all financial institutions that also take deposits. This is an important point. Lenders that do not hold a deposit taking license are not impacted by APRA’s restrictions.
Smartline has several lenders on our panel that are not impacted by these APRA restrictions.
Some of the restrictions that have been introduced to investment loan policy include:
- Some “major” lenders now call for borrowers to provide a 20% deposit when buying an investment property without collateral security.
- Despite variable interest rates being at 4.50% p.a. or less, many lenders now assess a borrower’s capacity at 7.50% p.a. or above.
- Many lenders have removed the negative gearing savings that once allowed investors to borrow more.
- A handful of lenders have insisted on borrowers making principle reducing repayments rather than interest-only repayments.
- The majority of deposit-taking lenders are no longer offering negotiated interest rate discounts for investment loans.
These changes have been flowing through to our lending team every day for the last two months. As you can see from the table below, residential dwelling sales in NSW are yet to be impacted but I feel the impact will start to be seen in August.
What can your clients do about these changes?
1. Use an experienced Smartline mortgage broker rather than a bank manager. Differentiation of Policy between lenders has not been this great since the late 90’s. One bank’s trash may be another bank’s treasure.
2. Use a Smartline mortgage broker with a large panel of non-deposit taking lenders. These lenders are not impacted by APRA’s restrictions and may be able assist your clients to meet their investment goals.
Houses and Units — More Qs than As?
RP Data / Corelogic have recently published some observations that challenge the grey cells.
In particular, the comparison between units and houses in every capital city can generate a lot of questions relating to supply and demand.
Some of the more thought-provoking questions that can be seen in this table below are:
1. Sydney units now have a higher median price than Melbourne houses. Does this reflect a general under supply of residences in Sydney or is Melbourne ready for a capital growth period?
2. Does the 44% gap between houses and units in Canberra point to an oversupply of units or an undersupply of houses?
3. The capital with the smallest percentage gap between houses and units is Perth. Does this reflect an oversupply of houses or an undersupply of units?
4. Does Hobart’s large percentage gap between houses and units reflect a low demand for units?
5. Could the small gap between houses and units in both Brisbane & Adelaide reflect a large source of land for houses?
All of the above questions can only be answered confidently with solid research.
Many people will tell you that trying to “time your entry” into the property market (for maximum capital growth) is a fool’s paradise, however, we beg to differ. Research is the key to a successful entry.
If you are looking to enter the property market, regardless of whether it is for the 1st, 2nd or even the 30th time, please make sure you use Smartline as part of your research process. We have access to an array of information that could tip the odds in your favour. We could also arrange your finance so that you are ready to move quickly when a well-researched opportunity presents itself.
Please give me a call. I would be more than happy to help you get the ball rolling.
About Aaron Sainsbury
With expertise spanning mortgage lending, property law, property investment and borrowing to invest within Self Managed Superannuation, Aaron Sainsbury offers more than 25 years professional advisory expertise.
He is an enthusiastic supporter of financial literacy, working closely with clients to help them gain and maintain control of their financial future.
Aaron is thoroughly committed to building lifelong relationships with clients based on the highest quality service, advice and trust.
Contact Aaron direct on 02 9818 8643 .
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