Never been a more important time to “read the play”
As we see it, a big part of our role as mortgage advisers is to keep you informed about changes in the mortgage market. Right now, there are big changes occurring that you should know about.
Most of these changes are being brought about by government regulatory policies that are currently trying to calm the property market.
Throughout most of 2016, Australia’s lenders were controlled by new regulations that penalised them if their investment loan volumes grew by more than 10%.
This 10% growth rule seemed to be working for a while. Lenders responded to the new cap on growth by:
Lifting interest rates on investment loans,
Making it harder to make interest only repayments,
Increasing minimum deposit amounts for investors,
Testing repayment capacity at higher interest rates,
Not including negative gearing savings as income,
Reducing the % of rental income that can be assessed for repayments,
And even refusing to write investment loans at all.
However, despite all of this effort, recent regulator statements have expressed frustration at the continued growth of the investment lending sector. As you can see below, November, December and January saw significant double-digit growth in investment lending.
So what does this mean? We all know that a significant interest rate rise would calm the property market down, however, the RBA is reluctant to do this as it would increase the Aussie dollar and hurt our exports.
If our current “read of the play” is correct, investors are going to find it even harder to fund their efforts. Our regulators are likely to do even more to quell the property beast. Investors can expect to see more rate rises, tougher credit approval criteria and find it more difficult to access “interest only” repayment products.
From Smartline’s perspective, the mortgage market has never been more difficult to navigate. The 10% growth rule (mentioned above) means that lenders are constantly pulling and pushing their volume levers (price, product & policy) to make sure they comply. We have had to employ three full-time people to maintain these constant changes on our software.
From your perspective, you can rest assured that we are all over these changes. If you have a problem in search of a solution, we are very well placed to find it.