Is Lending About To Get Easier For Investors?

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We like to keep our finger on the pulse of the lending climate in Australia. In this little update we talk about the current lending climate and how it may start getting easier for investors to get lending moving forward.

0:27 – The current lending climate may be getting softer/easier
3:23 – Do we have hard details about what’s happening?
4:34 – What do we suggest for investors given these changes that may be happening
6:51 – Other things you can do to get yourself in the best lending position

2015 Lending Changes Summary – https://www.youtube.com/watch?v=-gqNffZWoZA
2017 Lending Changes Summary – https://www.youtube.com/watch?v=XJC4m7fScao

Transcription:

In the last couple of years, opera has made some changes to lending guidelines that has made it harder for some investors in order to borrow money to purchase investment properties. And so today I want us to talk with Ben Everingham from pumped on property about the current lending climate and weather or not lendings likely to get tied tighter or if lendings likely to get easier. Can I imagine how you doing? Yeah, really good. Thanks for coming on. You were saying that you know, you’ve been talking to mortgage brokers and other people in the industry about the current lending climate and how it may actually be softening, not getting tied off. So do you want to kind of expand on that, give the good people out there some insight into what you’ve been hearing or working with?

Yeah, so this isn’t the stuff that you’re going to stay on the front page of the Financial Review or daily Tele at the moment, but from what I’m saying, inside the industry and from talking to my broker Aaron, he owns six of the mortgage choice franchises and has been in the industry for a long, long time now, is that as of about November last year, just ever so slightly. Some of that pressure that was being applied to particularly invest the lending, which was the one that app are really came in heavy on, has started to be softened up. So it looks like all of the major banks in Australia have now got the investor lending to an acceptable point and now they’re starting to, you know, not have that speed bump or that handicap around investors that they had last year. And that means a few different things. One, money should start flowing to investors over the next six to nine months a bit easier. Um, and then there might be more money on the table for investor lending again, so that investors can start thinking about investing in the right markets again.

Yeah. So in the past, investor lending was upper, made it harder and the banks made it harder for investors with multiple properties in order to get loans. I remember we did a video would’ve been probably a couple of years ago now, one to two years ago talking about how they were assessing loans, not based on the current interest rate a person was paying, but based on a higher interest rate, I think it was seven percent or around that at the time. Is that still happening?

Yeah. So as of now, as far as I’m aware, they’re still looking at people with a seven percent, um, principal and interest loan. They’re still looking at people’s discretionary income, but they’re probably looking at that with a little bit more of a fine tooth comb. Say what it sounds like they have found in the role banking commission is that banks weren’t necessarily you a really bad position financially on their books or though they’re never going to disclose it if they were in a, in an over leveraged position. But it was a process issue in the system where, you know, average Joe who comes into the industry and starts being a mortgage broker is rotting out, you know, this or that, or fudging this or that saying that the expenses in someone’s life are actually lower than what they’re putting on the application and therefore doctoring up the loan a little bit to get it over the line where, you know, now it’s kind of a little bit more responsible and the banks have been doing this for the last 18 months, you know, everything that comes out in the royal commission has already been implemented by the banks a year ago.

Um, the public’s just hearing about it for the first time, if you know what I mean.

Yep. So what sort of changes are happening? Do we know exactly what’s happening? Do we have any details about how lending is softening? Or is it just kind of general sentiment is we feel like we’re heading that way.

I don’t have hard data as, again, this is like an industry inside sorta thing. Like you can just, you starting to feel it. Clients that couldn’t get loans a year ago and now starting to look better granny flats for example, that were being valued at fifty cents in the dollar and are being valued at eighty five cents, ninety cents in the dollar, even 100 percent brand new properties that have been devalued down by $50,000 and now being valued in a more acceptable way in line with true market values, at least up in here in Queensland is where I’m experiencing that and like I said, the big one is there was a cap that the banks couldn’t learn more than 30 percent to investors or 30 percent of their book to investors that has now been lifted, which means facing go hard at that investment market hard at that first time market harder. That owner occupied market and it means there’s more scope to take that 30 percent of business there. Are they missing?

So what do we suggest for investors given these kinds of changes that may be happening? Like what action steps should people be taking? I would assume that if you’ve looked in the past, maybe one year, two years ago, and we’re struggling to borrow money from the bank now, maybe a good time to go back to your mortgage broker and to reassess the situation and whether or not you can borrow any money. Is that what we’re suggesting or is that what we think?

I think that’s exactly what we’re suggesting. You know, it’s good practice every six to 12 months to review your position and just as an exercise, see if you can borrow money or not. Um, and I think particularly over the next six to 12 months, we’re going to say a lot more people that couldn’t get loans over the last two years come back into the market either because they have saved more money, they have increased their incomes, they have reduced their debts or their property values have gone up. Combined with, you know, lending in the last couple of years has been really hard. Um, you know, now we’re sort of moving back to not business as usual, but you know, more responsible lending where it’s still enables the Australian population to keep moving forward with their dreams and goals of home ownership and investment ownership.

Yeah. So I think if you’re listening to this today, this is just a quick little reminder for something that you should probably be doing anyway. Most investors should be reviewing their portfolio every year and as well reviewing what they can borrow each year as well, but given what the lending climate has been, you might have been priced out and not being able to borrow money and you just thought that nothing has changed. And so there’s no point going back to your mortgage broker. Use this little video, use this episode as a reminder to, okay, let’s check in with the current lending climate. Let’s check in with my current position and where I’m at now as well as let’s do that again in six or 12 months time where some more of these changes may have come in as well. So don’t just sit on the sidelines and just assume that you can’t borrow over the next six, 12, 24 months, be going out there and actually saying what can I actually borrow? And then making investment decisions based on real data rather than just what you think is a hod lending climate.

Yeah, and once we get through these 12 to 24 month period, if you are one of those people thinking about doing something in the next couple of years, cool. If you’re not, then as always, continue to save some money. Continue to reduce the fixed costs in your life, continue to pay off debt. If you can continue to increase your income or increase the rent coming from properties that you owned to date and get yourself in the best possible position so that you know if it is 12 or 24 months from now, when you do feel comfortable, you can actually hit the ground running and take advantage of what I think is going to be a really interesting second half of the cycle. Not so much in Sydney and Melbourne, but in the other markets in Australia. Yeah,

and so hope that this has been helpful to you guys as we said, no real hard data today. If opera come out with some major changes, then we might review those in the future, but just want to keep our finger on the pulse of the lending climate. Also keep you guys up to date as well. So we hope this has been useful if you guys are looking to invest this year but needs some help setting a strategy than Ben in the team over here pumped on property a offering free strategy sessions to you guys so you can book a time, get on the phone with them, talk about where you’re at, what you want to do, and they can help you work out a way to get there. So go to on property.com dot EU ford slash session to check that out and book a time over there. Um, otherwise, until next time, stay positive.

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