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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

Aussie hotspots enjoying a sudden property boom

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Aussie hotspots enjoying a sudden property boom

Property prices across the country saw their steepest fall in 15 years in 2018, bringing them back to 2016 levels in what has been a housing downturn like no other.

But it’s not bad news everywhere – while investors shy away from Sydney and Melbourne, there are some hotspots which are enjoying a sudden property market boom, according to news.com.au.

Queensland

The South East and Gold Coast regions are seeing the most buying activity, with Brisbane, Moreton Bay, the Sunshine Coast and Ipswich booming along with the Gold Coast, Tugun and Burleigh Heads.

Tasmania

Unsurprisingly Hobart is the strongest property market, although activity has spread beyond the inner city and into the middle and outer rings, while Launceston has also recorded solid interest.

South Australia

The entire South Australian capital is booming, although most activity is happening in the inner city and Adelaide Hills.

New South Wales

While many investors have deserted Sydney, areas such as Paddington and Winston Hills and the nearby Central Coast are doing well.

Other booming areas are further north in Tweed Heads and Byron Bay.

View from the experts

Daniel Walsh of investment buyer’s agency Your Property Your Wealth, told news.com.au that investment activity has now firmly shifted to Queensland.

“We’re seeing rising demand particularly in the housing sector in southeast Queensland where yields are high and jobs are increasing due to the amount of government expenditure around infrastructure which is attracting families to the Sunshine State,” he said.

“With Brisbane’s population growth at 1.6 per cent and surrounding areas like Moreton Bay at 2.2 per cent, the Sunshine Coast at 2.7 per cent and Ipswich at 3.7 per cent, we are forecasting that Brisbane will be the standout performer over the next three to five years.”

Realestate.com.au chief economist Nerida Conisbee agreed, telling news.com.au Sydney investors especially had started to turn their attention north.

“Interest is strong in the Gold Coast across the board although there’s more action on the south side in places like Tugun and Burleigh Heads,” she said.

She added there was also a notable trend towards Tasmania, Adelaide and pockets of NSW such as Tweed Heads and Byron Bay.

Adelaide has also been flagged as finally booming after recently hitting the highest median house price ever recorded, largely driven by jobs and economic growth off the back of defence contracts, the announcement of the new Australian Space Agency and other investment in the area.

“Inner Adelaide, beachside and the Adelaide Hills tend to have the most activity but there’s also quite a lot of rental demand in low-cost suburbs so we’re expecting to see a bit more investment there in those really cheap suburbs over the next 12 months,” Conisbee said.

“There you can get houses for $250,000 so for an investor, it’s a relatively low cost in terms of outlay and the area is seeing really strong rental demand which means you’re more than likely to get tenants, so for investors it’s a really attractive area,” she said.

Source: au.finance.yahoo.com

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APRA Scraps Interest-Only Lending Cap

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APRA Scraps Interest

The Australian Prudential Regulation Authority will ease its curbs on interest-only residential mortgage lending, it announced on Wednesday.

The supervisory benchmark was put in place as a temporary measure, leading to significant declines in lending to investors and putting downward pressure on boiling house prices and Australia’s record high household debt-to-income ratio.

The proportion of new interest-only lending is now significantly below the 30 per cent threshold APRA introduced in March 2017.

APRA will remove the 30 per cent limit from 1 January 2019, with plans to conduct a review into banks’ lending practices next year.

APRA Scraps Interest-Only Lending Cap

In April, APRA removed the 10 per cent investor growth “speed limit” it had imposed in 2014.

APRA said that the removal of the caps was subject to the banks providing “certain assurances” about the strength of their lending standards.

“APRA’s lending benchmarks on investor and interest-only lending were always intended to be temporary,” APRA chairman Wayne Byres said.

“Both have now served their purpose of moderating higher risk lending and supporting a gradual strengthening of lending standards across the industry over a number of years.”

In a letter to the banks, APRA said that its curbs had reinforced sound residential mortgage lending practices and “significantly improved” the banks’ lending standards.

The result, APRA says, is more resilient banks and better overall financial system stability.

Interest-only lending still ‘higher risk’

Owner-occupier interest-only lending remains a higher risk form of lending, the regulator said.

“APRA expects that ADIs will maintain prudent internal risk limits on interest-only lending.

“These internal limits should cover both the level of new interest-only lending and the type, including lending on an interest-only basis to owner-occupiers and lending on an interest-only basis at high LVRs.”

The regulator says it plans to conduct a review of banks’ risk controls on interest-only lending in 2019 and will continue to “closely monitor” conditions in the housing market.

 

Source: theurbandeveloper.com

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CBA axes SMSF home and office property loans amid growing market fears

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brisbane market fears

CBA, the nation’s largest mortgage lender, is axing residential and commercial loans for self managed super funds amid growing concerns about regulatory problems, property market weakness and stricter capital adequacy rules squeezing returns.

The bank is set to announce it is pulling SMSF lending product, SuperGear, in a bid to “become a simpler, better bank and streamline our product range”, from October 12.

Westpac Group, the nation’s second largest mortgage lender, pulled out of the sector in July making similar claims about wanting to “simplify and streamline” its product range.

But the moves will shock mortgage brokers and financial advisers and make nervous property investors more jittery about the outlook amid falling prices, rising costs and oversupply, particularly for apartments in the inner suburbs of Melbourne, Sydney and Brisbane.

It is also being done during a period of increased regulatory scrutiny of leveraged superannuation assets, potential reputational risks to lenders and advisers from “high risk” single investment SMSF schemes, and lenders’ capital adequacy requirements.

“CBA has decided to withdraw its SMSF lending product that allows SMSF trusts to purchase both residentially and commercially secured properties,” a spokesman said.

“This is part of our strategy to become a simpler, better bank. We are streamlining our product portfolio and have decided to discontinue SuperGear.”

Support existing accounts

The bank said it will be writing to customers who hold a SuperGear loan outlining the changes.

It will continue to support existing loan accounts.

“We are seeing the writing on the wall for leveraged SMSFs,” said Sally Tindall, director of research for RateCity, which monitors rates for financial service products. “This calls into question the viability of the leveraged SMSF sector.”

Regulators fear problems arising from SMSF investors leveraging their superannuation to invest in a single residential property because of the lack of diversification and increasing dangers of loss in a falling property market where it is difficult to find tenants. Systemic risk is low because the loans are non-recourse, which means they are secured by the property.

The Australian Taxation Office and Australian Securities and Investments Commission are targeting the use of SMSFs to invest in property after a review revealed 90 per cent failed to comply with “best interests” tests and other legal obligations.

It warned the strategy of gearing through an SMSF to invest in property, which is heavily promoted by property seminars and “property one-stop shops”, is risky.

The one-stop shops typically involve real restate agents, developers, mortgage brokers, accountants and financial advisers.

A key finding of the David Murray-led financial system inquiry in 2014 was that leverage should be banned in superannuation funds to mitigate the risk of financial instability. The government rejected his advice and Mr Murray said that was a mistake.

Mr Murray, who was recently appointed chairman of AMP, the nation’s largest financial conglomerate, is expected to launch an internal review of its SMSF lending practices.

Banks are also believed to be quitting the sector because of increased capital adequacy requirements by the Australian Prudential Regulation Authority are squeezing profits.

Legal restrictions

The greater complexity associated with SMSF loans and relatively small size of the market are also disincentives, according to analysts.

“As banks are looking to streamline and reduce costs, these are the types of products that get reduced,” he said.

There are fears that legal restrictions – or caps – on how much an SMSF investor can contribute to their plans could cause a credit crunch for many borrowers and force fire sales of their properties, which becomes more likely as property capital values and yields slump.

This scenario could arise if the expense of renovating a property, or supplementing rental income, exceeded annual caps.

Lenders are also lowering their lending book risks by increasing scrutiny of borrowers’ income and expenditure in assessing their capacity to repay.

Other major lenders are also tightening their SMSF lending policies in addition to increasing rates on loans and other property-related credit.

Nearly $700 billion is held in SMSF funds by more than 1 million investors. During the past four years the number of members investing in property has increased from about 3.6 per cent to 6.9 per cent of SMSF fund assets.

Source: Afr.com

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