{"id":20440,"date":"2018-03-06T01:00:22","date_gmt":"2018-03-05T14:00:22","guid":{"rendered":"https:\/\/www.realestatetalk.com.au\/?p=20440"},"modified":"2018-03-06T01:00:22","modified_gmt":"2018-03-05T14:00:22","slug":"io-investors-forced-to-sell-miriam-sandkuhler","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/io-investors-forced-to-sell-miriam-sandkuhler\/","title":{"rendered":"IO Investors forced to sell \u2013 Miriam Sandkuhler"},"content":{"rendered":"

APRA continue to tighten the lending to investors with a direction to banks to cut back on interest only loans.\u00a0 Miriam Sandkuhler<\/strong> discusses the likely impact on investors and the market.
\nTranscript:
\nKevin:\u00a0\u00a0<\/strong>APRA are continuing to tighten some of the rules around borrowing money, particularly for investors. We\u2019ve seen recently moves by APRA to get the banks to reduce their books in terms of interest-only loans. And many, many loans, of course, are interest-only. So, what does that mean? What\u2019s going to happen to the landscape? Miriam Sandkuhler from Property Mavens has been looking at this, and she joins me.
\nGood day, Miriam. How are you doing?
\nMiriam:\u00a0\u00a0<\/strong>I\u2019m good, Kevin. How are you?
\nKevin:\u00a0\u00a0<\/strong>Good. Give me the stats behind this, because I know you\u2019re on top of this. How is the landscape changing?
\nMiriam:\u00a0\u00a0<\/strong>A while back, there was a senate committee hearing, and they discovered that Westpac at the time had 50% of their loans made up of interest-only loans on their books. This resulted in APRA coming back to the industry saying \u201cRight, you\u2019ve got to reduce it.\u201d I think most lenders now have to have not more than 30% loans on their books that are interest-only.
\nSo, what\u2019s going to happen as a result \u2013 and this recently happened to me \u2013 is that people who are coming up to the end of their interest-only period will be either forced to convert to principal and interest, which means there\u2019s an additional financial outlay on them, or they\u2019ll have to go re-finance elsewhere.
\nBut where they can\u2019t re-finance, they\u2019re going to have to determine whether or not they can carry that extra repayment that they\u2019re going to have to cash flow
\nKevin:\u00a0\u00a0<\/strong>Yes, it could also lead to cocktails, as well, couldn\u2019t it \u2013 people having to get a couple of loans just to effectively tie them over?
\nMiriam:\u00a0\u00a0<\/strong>That\u2019s right. And whether or not they have the capacity to do that and the lenders will let them do it is a whole other thing. But worse than that, they\u2019ll be owner-occupiers in this position, and particularly with predatory lending a number of years ago, there\u2019ll be people back then who wouldn\u2019t qualify for a loan today, and they probably won\u2019t be able to service any extra repayments. So, they actually may in fact be forced to sell their home, as may investors who might have multiple negatively geared properties in their portfolio where they have to do the same.
\nKevin:\u00a0\u00a0<\/strong>Yes, the last thing we\u2019d want to see is a glut of those sorts of properties on the market. It\u2019s not going to do much for market conditions. I\u2019m actually surprised by those figures, Miriam, when you talk about Westpac and their bank being 50% made up of interest-only loans. Is that all borrowings, or is that investor only?
\nMiriam:\u00a0\u00a0<\/strong>No, that was their whole lending portfolio at the time.
\nKevin:\u00a0\u00a0<\/strong>That\u2019s staggering, isn\u2019t it \u2013 that that many people would be thinking to do interest-only loans?
\nMiriam:\u00a0\u00a0<\/strong>Well, I think for a lot of people and the lending industry, it was easy to convince people to take on the debt. But as a result, APRA is now forcing the banks to reduce the number and value of interest-only loans on their books.
\nYes, potentially, it could trigger a U.S.-style housing meltdown. Not in the terms of people handing in their keys and walking away, because they can\u2019t do that in this country. But a lot of people coming up going \u201cI can\u2019t hold this property, I have to sell it.\u201d
\nAnd again, someone who doesn\u2019t have a balanced portfolio \u2013 let\u2019s say they\u2019ve only got negatively geared properties, so they don\u2019t have a mixture of negatively geared and positively geared \u2013 if they have to start offloading properties, they want to look at that now, sooner rather than later, because they don\u2019t want to do it when there\u2019s a glut of the same property type on the market.
\nAnd as you and I know, things like house-and-land packages and apartments in some instances, there\u2019s already a glut. So, the last thing they want to do is have a distress sale among the glut of the same property type that they need to get rid of.
\nKevin:\u00a0\u00a0<\/strong>I don\u2019t know whether you can answer this question, Miriam, but would the banks be in a position where they could actually force someone to move from interest-only to principal and interest if they\u2019re mid-way through their loan term? Or does that have to be at the end of the loan term?
\nMiriam:\u00a0\u00a0<\/strong>My understanding is it needs to wait for the interest-only period to conclude, and then you either pay the extra P&I payments or you try and re-finance elsewhere. So, either of those scenarios will take place.
\nKevin:\u00a0\u00a0<\/strong>Interesting. We\u2019ll watch what happens with this. Miriam, thank you so much for your time. Miriam Sandkuhler is from Property Mavens. Thanks, Miriam.
\nMiriam:\u00a0\u00a0<\/strong>You\u2019re welcome, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

APRA continue to tighten the lending to investors with a direction to banks to cut back on interest only loans.\u00a0 Miriam Sandkuhler discusses the likely impact on investors and the market. Transcript: Kevin:\u00a0\u00a0APRA are continuing to tighten some of the rules around borrowing money, particularly…<\/p>\n","protected":false},"author":176692471,"featured_media":20441,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[33,34,10,11,13,36,25],"tags":[101],"class_list":["post-20440","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-case-studies-topic","category-finance-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-sponsored-channels","tag-podcast"],"yoast_head":"\nIO Investors forced to sell \u2013 Miriam Sandkuhler - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/io-investors-forced-to-sell-miriam-sandkuhler\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"IO Investors forced to sell \u2013 Miriam Sandkuhler - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"APRA continue to tighten the lending to investors with a direction to banks to cut back on interest only loans.\u00a0 Miriam Sandkuhler discusses the likely impact on investors and the market. 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