{"id":5348,"date":"2015-08-09T01:00:06","date_gmt":"2015-08-08T15:00:06","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=5348"},"modified":"2015-08-09T01:00:06","modified_gmt":"2015-08-08T15:00:06","slug":"how-australias-biggest-banks-have-been-forced-to-restrict-their-mortgage-lending","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/how-australias-biggest-banks-have-been-forced-to-restrict-their-mortgage-lending\/","title":{"rendered":"How Australia\u2019s biggest banks have been forced to restrict their mortgage lending – Andrew Mirams"},"content":{"rendered":"

 
\nOur finance expert Andrew Mirams<\/strong>,\u00a0from Intuitive Finance, tells us how Australia\u2019s biggest banks have been forced to restrict their mortgage lending, in a move that could severely impact investors. APRA has ordered some banks to increase the amount of capital required for their residential mortgage exposures. In today’s show Andrew looks at how that will flow through.
\n <\/p>\n

Transcript:<\/h4>\n

Kevin<\/b>:\u00a0 Some sobering news on the horizon \u2013 a warning of heightened levels of risk in the housing market. After that warning, APRA has ordered five banks to increase the amount of capital required for their residential mortgage exposures. This could be just the tip of the iceberg in terms of changes that are on the horizon that are going to impact you and me as property investors.
\nWith more information on this, Andrew Mirams from Intuitive Finance joins us. Andrew, what do you believe is ahead?
\nAndrew<\/b>:\u00a0 Good day, Kevin. How are things? There are probably a lot of changes that we have already seen happen, and I think that it would be na\u00efve to say that there are not more coming. We\u2019re seeing quite a number of lenders already changing the way they assess borrowers and more particularly, the lending to investment has gotten quite harsh.
\nWe had some of the before-and-after examples where we\u2019ve seen clients going from being able to borrow up around $1 million, and that\u2019s now come down to around $400,000. Every client is different, and there are a whole range of different serviceability measures and things that we do.
\nKevin<\/b>:\u00a0 On this point of the notice by APRA to the banks, what does that actually mean? Explain to me how that works.
\nAndrew<\/b>:\u00a0 Basically, what APRA has said is they\u2019re worried about the banks\u2019 liquidity and if the market was to crash \u2013 as they\u2019re all fearful of \u2013 they\u2019re worried whether the banks have enough capital to be able to fund and absorb any losses. Right at the moment, the Big Five banks \u2013 ANZ, Commonwealth, NAB, Westpac, and Macquarie Bank they\u2019ve put in there because they are quite strong in the investment lending \u2013 all hold around about 16% of liquidity or capital that is set aside\u2026
\nKevin<\/b>:\u00a0 As a buffer.
\nAndrew<\/b>:\u00a0 Yes, to be able to withstand or withhold any adjustments in the markets and things like that.
\nFrom July 1st<\/sup> next year, they\u2019re going to be asked to have 25%. What does that mean? That doesn\u2019t sound like a lot \u2013 9% \u2013 but if you put it into some big numbers like what the banks do, that means they\u2019re going to have to put aside billions of dollars in capital that they can no longer use. What that will mean for you and me potentially is that it might cost us all more to get access to what they can lend out.
\nKevin<\/b>:\u00a0 Less funds and probably more requirement for a bit more \u201churt money\u201d from people who want to buy property.
\nAndrew<\/b>:\u00a0 Yes, absolutely. Again, we\u2019re seeing changes coming through with banks and what LVRs they are willing to do for investors. We\u2019re seeing quite a number now restricting the investment loans back to 80%. Mortgage insurance going up to 90% and 95% is no longer available.
\nI think it would be na\u00efve to think that it\u2019s not only a matter of time until most of the lenders follow suit, because they\u2019ve all been asked to restrict or slow down on their investment lending. While we\u2019re seeing some come through quite quickly, I think most of the other lenders are probably sitting back as well, going, \u201cWhat does this mean for us? How do we implement it?\u201d
\nSome of them have system constraints. It\u2019s not as easy as flicking a switch so they\u2019ll be working on things. I know that for a fact because I\u2019m in regular contact with a lot of the major lenders and senior management.
\nKevin<\/b>:\u00a0 With these changes, does it look like they\u2019re going to tighten up on lending in self-managed superannuation funds, as well, Andrew?
\nAndrew<\/b>:\u00a0 Yes, it is, Kevin, and it\u2019s happening already. We\u2019ve had a couple of lenders pull out of self-managed super fund lending altogether, the National Australia Bank probably being the largest one of those. We just recently had Sir George \u2013 who has been quite a big player in the self-managed super fund space, as well \u2013 reducing its LVRs for super funds from 80% if you have a company in trust back to 70%.
\nThe other thing to note with that is it\u2019s almost like reducing it back to 60% because now they\u2019re also asking that the super fund has at least a 10% liquidity. If you\u2019re buying a property for $500,000, you would need to contribute $150,000 plus your associated stamp duties and costs plus also make sure you have another 10% in liquidity sitting aside.
\nKevin<\/b>:\u00a0 It\u2019s certainly getting tougher, isn\u2019t it?
\nAndrew<\/b>:\u00a0 It is. Yes, it\u2019s like every part of the cycle. It\u2019ll get tougher and the measures will be implemented to slow things down, and then what we\u2019ll see is in time, it will rebalance itself. Home-occupiers and buyers will get out there and hopefully take advantage of the low rates and upgrade and things like that, and it will turn around again.
\nKevin<\/b>:\u00a0 There is a positive in all of this, too. That is that I think anything that strengthens the banking industry and keeps it nice and stable as opposed to what it had in America, I think is a good thing.
\nAndrew<\/b>:\u00a0 No doubt. Our banks were very strong through the GFC and the measures that our banks and probably the regulators have had and been able to manage our process and everything like that, all the way through was very strong. There is no doubt that the intentions are right.
\nThe other thing is it takes a little bit of heat out of the markets, where we\u2019ve said that Sydney and Melbourne have been very strong of late. It probably is going to avoid a crash where we\u2019re going to get that boom\/bust cycle. If we just take a bit more measure to the markets, then hopefully it should be a good thing for all of us in the long term.
\nKevin<\/b>:\u00a0 Always good talking to you, Andrew Mirams from Intuitive Finance. Thanks for your time.
\nAndrew<\/b>:\u00a0 Pleasure, Kevin. Thanks.<\/p>\n","protected":false},"excerpt":{"rendered":"

  Our finance expert Andrew Mirams,\u00a0from Intuitive Finance, tells us how Australia\u2019s biggest banks have been forced to restrict their mortgage lending, in a move that could severely impact investors. APRA has ordered some banks to increase the amount of capital required for their residential…<\/p>\n","protected":false},"author":176692471,"featured_media":5350,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,13,25],"tags":[101],"class_list":["post-5348","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-latest-story","category-sponsored-channels","tag-podcast"],"yoast_head":"\nHow Australia\u2019s biggest banks have been forced to restrict their mortgage lending - Andrew Mirams - 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\/how-australias-biggest-banks-have-been-forced-to-restrict-their-mortgage-lending\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How Australia\u2019s biggest banks have been forced to restrict their mortgage lending - Andrew Mirams - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  Our finance expert Andrew Mirams,\u00a0from Intuitive Finance, tells us how Australia\u2019s biggest banks have been forced to restrict their mortgage lending, in a move that could severely impact investors. 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