Who Stopped You From Borrowing Money?
- By Peter Gordon
- •
- 18 Apr, 2019
There are four main players at work in the current ‘Credit Crunch’ - the Federal Government, the Australian Prudential Regulation Authority (APRA, the statutory regulator of our finance industry), the Royal Commission into Banking and our banks.
They have all played a part in restricting the amount of available credit to Australian investors. One of them was required, the Royal Commission, to clean up an industry.
Sadly, the actions and recommendations of these four have reduced confidence across Australia and reduced your ability to borrow money to invest in property.
Our Government thought there were too many people investing in property. They believed that the investors were pushing up home prices. This nationwide assumption was based on the activity in Sydney and Melbourne property markets. In these two cities, approximately 50% of people borrowing money were borrowing for investment purposes and they were taking up interest only loans.
APRA pushed the banks to restrict lending to investors and reduce the amount of borrowers taking up interest only loans to below 30% of the mortgages on their books.
The Royal Commission into Misconduct into Banking, Superannuation and Financial Services Industry put the wrath of God into the banking industry to clean up their act. It wasn’t just restricted to lending money, it covered superannuation and insurance practices as well. It was really about the banks giving out bad advice, questionable spending of people’s retirement savings and generally poor standards.
The banks, in turn, increased interest rates for investors and reduced access to interest only loans for new and existing borrowers. The banks then tightened their credit policy making it even harder for people to borrow money. At the same time they changed their criteria to only allow interest only loans if you had a 20% deposit.
So what we have is ‘The Credit Crunch’, and it’s primarily affecting property investors.
As investors, as you work through the minefield of the new lending landscape you’ll find that it’s a whole lot harder to borrow money. You may feel like we’ve become prisoners of the banking system.
I believe the only winners here are the banks. They’re charging higher interest rates for investors and holding existing customers to ransom when they find they can’t refinance. They’re still making huge profits without doing one extra thing to earn it!
The aim of the Government is to tighten credit for investors, it has now reached such a limit that I believe it has slowed the economy down.
These are just my thoughts, and, whilst it’s worrying that this is happening, I do know that it’s only a matter of time until it all changes again.
Don’t let misinformed Government policy and money hungry banks affecting your future.
If you want to invest, do your research, connect with experts, get a good broker and make sure the numbers add up. Be vigilant and thorough.
There are a lot of people making life changing investment decisions right now.
Peter Gordon
Director of Investo property
Please contact the Investo Team if now is the time for you to make those decisions for your future.
| Quiet simply, the Palms is the place to buy! |
Sydneysiders and Melburnians, put aside your equally outstanding flat whites for a moment. Stop bickering about whether great beaches beat cool laneways (they do) and desist from debating whether all baristas require waxed moustaches (ideally).
Because Brisbane is closing in on the title of Australia’s best city, and we must join forces to keep this subtropical upstart in its place.
Time magazine recently named Brisvegas on its “World’s Greatest Places” list, and omitted our cities. It’s a huge shock (and who knew they still published Time magazine?). But they might be onto something.
Time points to the 2032 Olympic and Paralympic Games, which will be hosted in the maroon metropolis. Brisbane will do a fine job, even though it’ll baffle the world when rugby league is added to the schedule and Queensland is allowed to field its own team.
Time’s most radical claim is that Brisbane is worth visiting now, but tourism is surging. Not only did Lin-Manuel Miranda recently drop in to catch Hamilton , but hundreds of Hamilfans flew up to watch his interview with Leigh Sales (presumably unaware that it would subsequently arrive on iView for free).
A leading local agent has appraised each side of these duplex's to be worth $665k on completion and rent for $495 per week. So that is massive potentail instant equity of up to $390K on completion, which is incredibly hard to find.