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Apartment borrowing squeeze

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A second lender is set to announce that it is cutting back on lending to high-rise and high-density apartments.Brisbane Investor

Firstmac, which has about $8 billion under management, is confidentially warning mortgage brokers about plans to toughen lending criteria and tighten the definition of “high density”.

The clampdown is targeted at both non-residents and investors, who in some cases will not be able to include rental income for debt servicing.

“It is quite obvious there is going to be a problem in the future,” said FirstMac chief executive Kim Cannon about why it was tightening lending for high rise apartments.

 “Look at the number of cranes everywhere. In the cities, along train lines in the outer suburbs there are apartments being built and people are beginning to ask who is going to live in them.”

Mr Cannon added it focused on high quality low-rise dwellings and has no exposure to high rise..

Firstmac is a non-bank lender that generates funding from overseas investors that are asking whether a bubble is inflating in the Australian market.

“Naturally we are conservative about lending,” he said.

Lenders are also fearful that overseas buyers, many who purchased multiple apartments because of generous conditions offered by banks, might forfeit deposits and renege on off-the-plan purchases.

Tighter lending could also spook property developers, some of whom have suffered 20 per cent losses as Perth’s boom market went bust.

Under Firstmac’s new arrangements, any apartment in a development with more than six floors will be considered “high density”.

The changes will hit large numbers of high rise apartments in the lender’s hometown of Brisbane’s central business district, inner suburbs and the Gold Coast.

It will also directly impact lending around central Sydney and Melbourne and surrounding high rise precincts, such as South Wharf, Southbank, Docklands, parts of South Yarra and South Melbourne.

Firstmac said loans of up to 70 per cent of the apartment’s value can be considered but rental income will not be included for servicing the debt.

Loans over 70 per cent and up to 80 per cent will be considered if the borrowers have lender’s mortgage insurance, which is fee charged for finance lenders for buyers with deposits less than 20 per cent of the property’s purchase price.

“Non-resident lending will not be considered under the high density policy,” according to James Govind Firstmac business development officer

It follows Macquarie Bank’s plans to hit the brakes on lending to high-rise and high-density apartment dwelling in up to 120 postcodes around the nation.

Macquarie Bank, which did not limit the restrictions to apartments of six floors or less, also imposed higher borrower deposits and tougher income checks and closer scrutiny of employment references.

More than 210,000 apartments are expected to flood into Melbourne and Sydney over the next two years, which is the equivalent to the existing number of apartments for sale, according to analysis by RP Data Core Logic, which analyses property sales and rents.

Several thousand are expected to be completed in central Brisbane over the same period.

A “red alert” – an underperformance warning – has been issued for inner-city Brisbane apartments by SQM Research, which monitors prices and performance.

For example, the asking price for apartments in Brisbane has increased by 1 per cent during the past 12 months, less than the rate of inflation.  In Sydney and Melbourne it is about 6 per cent.

Firstmac sources more home loans online than NAB-owned UBank, according to recent research.

Property valuer Gavin Hegney recently said a 20 per cent fall in Perth apartment values and rents was triggered by the same mix of demand, supply and pricing now happening in Sydney, Melbourne andBrisbane.

In a separate move, AMP Bank tightened lending for suburban dwellings on the outer fringes of the nation’s capitals.

Teachers Mutual Bank has suspended investment borrowing because high demand has breached the regulatory 10 per cent annual speed limit.

But other lenders, such as Westpac, is attempting to grab market share by lowering the size of the deposits it will require from property investors.

Article originally published at www.afr.com by Duncan Hughes 27/5/2016

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Finance

The property party is over as our biggest bank curbs lending

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The property party is over as our biggest bank curbs lending

Australia’s housing-market extravaganza is over. That’s the call the nation’s biggest mortgage-lender is making when it comes to its own money.

In the past year, the Commonwealth Bank has reduced its exposure to apartment developers by more than $1 billion, or 23 per cent, according to data included in its first-half earnings report, released on Wednesday.

When the nation's biggest lender starts reining back it's a good sign the party is over.

When the nation’s biggest lender starts reining back it’s a good sign the party is over.

What’s more, the bank included a chart in its results highlighting its overall home-loan portfolio is growing notably slower than its competitors.

It’s also pulling back on loans to property investors, which rose just 0.5 per cent compared to 7.5 per cent growth for owner-occupier loans.

Sydney house prices, which surged 75 per cent between February 2012 and July, have now dropped 3.1 per cent from their peak, data released last week showed. But Sydney prices are still up 70 per cent on their cyclical low hit in February 2012.

Melbourne fared somewhat better, thanks in part to rapid population growth, with prices easing 0.2 per cent in January to be 8.0 per cent higher for the year.

CBA records $4.7b half-year profit, but Austrac fine and compliance costs weigh

CBA records $4.7b half-year profit, but Austrac fine and compliance costs weigh

Housing loans have been the driver of Australian banks’ recent run of bumper profits. So when the nation’s biggest lender starts reining back it’s a good sign the party is over.

Originally Published: www.brisbanetimes.com.au

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Finance

New postcode restrictions for home loans

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New postcode restrictions for home loans

In a notice issued to mortgage brokers today the CBA announced it will roll out a range of changes including restrictions on lending in some postcodes.

This includes forcing customers to stump up fatter deposits in order to get a home loan.

It will impact all types of properties including homes and apartments and also borrowers regardless of whether they are owner occupiers or investors.

Commbank is rolling out a range of changing which will make it tougher for customers to successfully get a loan.

Commbank is rolling out a range of changing which will make it tougher for customers to successfully get a loan.

In the notice it said from Monday, December 4 the key changes will include:

– Reducing the maximum loan-to-value ratio from 80 to 70 per cent for customers without Lenders Mortgage Insurance (an insurance the customer pays and protects the lender not the borrower.) This means borrowers with a deposit less than 30 per cent must pay expensive LMI costs.

– Reducing the amount of rental income and negative gearing eligible for servicing which will impact investors.

– Change eligibility for Lenders Mortgage Insurance waivers and LMI offers for customers in some postcodes.

Home loan lending with the nation’s largest bank is about to get harder.

Home loan lending with the nation’s largest bank is about to get harder.

CBA said the new Postcode Lookup tool which will start from Monday will allow the bank and brokers to determine whether a borrower can successfully borrow in a particularly region or postcode and it will reduce customers wasting time applying where they are likely to get knocked back on a loan.

CBA has not released the postcodes and regions these changes will impact.

The move is a result of the responsible lending restrictions put on lenders by regulators to cool the red-hot lending market.

Home Loan Experts’ managing director Otto Dargan said these changes are significant and will impact many borrowers.

Home Loan Experts managing director Otto Dargan encourages borrowers to get unconditional approval before buying a property.

Home Loan Experts managing director Otto Dargan encourages borrowers to get unconditional approval before buying a property.

“Lenders keep an eye on the economy and their exposure to different property markets and adjust their lending policies to manage their risks,” he said.

“We strongly recommend that home buyers don’t commit to buy a property until they have an unconditional approval from a bank.

“You could win an auction and then find out that your pre-approval is worthless, and then what are you going to do?”

Unconditional approval is when your loan application has been fully approved and is not subject to any terms or conditions.

Originally Published: www.ipswichadvertiser.com.au

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Finance

New postcode restrictions for home loans

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brisbane

brisbane

THE nation’s largest lender is tightening its belt and making it even tougher for potential borrowers to successfully get a loan.

In a notice issued to mortgage brokers today, the CBA announced it will roll out a range of changes including restrictions on lending in some postcodes.

This includes forcing customers to stump up fatter deposits in order to get a home loan.

It will impact all types of properties including homes and apartments and also borrowers regardless of whether they are owner occupiers or investors.

Commbank is rolling out a range of changing which will make it tougher for customers to successfully get a loan.

Commbank is rolling out a range of changing which will make it tougher for customers to successfully get a loan.

In the notice it said on Monday, December 4 the key changes will include:

– Reducing the maximum loan-to-value ratio from 80 to 70 percent for customers without Lenders Mortgage Insurance (an insurance the customer pays and protects the lender, not the borrower.) This means borrowers with a deposit less than 30 percent must pay expensive LMI costs.

– Reducing the amount of rental income and negative gearing eligible for servicing which will impact investors.

– Change eligibility for Lenders Mortgage Insurance waivers and LMI offers for customers in some postcodes.

Home loan lending with the nation’s largest bank is about to get harder.

Home loan lending with the nation’s largest bank is about to get harder.

CBA said the new Postcode Lookup tool which will start from Monday will allow the bank and brokers to determine whether a borrower can successfully borrow in a particular region or postcode and it will reduce customers wasting time applying where they are likely to get knocked back on a loan.

CBA has not released the postcodes and regions these changes will impact.

The move is a result of the responsible lending restrictions put on lenders by regulators to cool the red-hot lending market.

Home Loan Experts’ managing director Otto Dargan said these changes are significant and will impact many borrowers.

Home Loan Experts managing director Otto Dargan encourages borrowers to get unconditional approval before buying a property.

Home Loan Experts managing director Otto Dargan encourages borrowers to get unconditional approval before buying a property.

“Lenders keep an eye on the economy and their exposure to different property markets and adjust their lending policies to manage their risks,” he said.

“We strongly recommend that home buyers don’t commit to buying a property until they have an unconditional approval from a bank.

“You could win an auction and then find out that your pre-approval is worthless, and then what are you going to do?”

Unconditional approval is when your loan application has been fully approved and is not subject to any terms or conditions.

Originally Published: www.ipswichadvertiser.com.au

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