Commonwealth Bank of Australia is the biggest property lender in the land. Yesterday afternoon they announced that new finance applications for some investment home loans are set to be postponed indefinitely. This is a pretty big announcement and could shake up Australia’s hot property markets.
The Zinger Finance team received an email yesterday announcing the decision, which comes in to effect on Monday 13th February. At the moment, CBA has not commented on how long this suspension will last, or what it means for applications that are submitted between now and next Monday. Speculation amongst industry professionals is that loan transfer applications will be reviewed on a case-by-case basis.
So what does this mean for you?
Well, no-one is entirely sure yet. We believe that you can still refinance if you have an existing CBA mortgage product but if you are wanting to switch over from another lender, you may be out of luck.
What we might see as a result of this, is other, smaller lenders being inundated with investor loan applications. The concern with this is that those lenders may start to worry about breaching the lending limits that APRA put in place – there is a 10% lending speed limit, which is calculated on a monthly rolling basis. If this is the case, other lenders may follow in CBA’s footsteps, making it more difficult for investors to secure new loans.
This is the latest shock-wave in the industry, following the APRA changes at the beginning of last year that aimed to minimise the number of properties that investors were buying. A month ago, CBA’s rates for investor loans rose by up to 15 basis points and a popular loophole that allowed property investors to switch from principal and interest loans to interest-only, meaning lower monthly repayments, was shut down.
Because the demand is higher than the levels of available stock, the value of property is still growing quickly. This creates a positive feedback loop as investors gain equity and re-invest. What APRA wanted to do is flip it around so that demand is more in line with stock availability. In theory this would slow price growth and make property more accessible to the average, every-day Australian, while at the same time, balancing the financial sector between investor and occupier loans.
What can you do?
If you’re currently on the roller-coaster ride that is property investment, you need to think smart now! Explore all of your options, leaving no stone unturned, and make sure your strategy remains viable if any dominoes should fall. You need to look at ways to stay in the game:
- Reach out to other lenders – what finance options are they offering?
- Reassess your portfolio – are your finances fully optimised?
- Speak to like-minded people – what are they doing to get around these challenges
Senior Finance Strategist at Zinger Finance, Graham Turnbull, says the time to act is now!
“Don’t wait for things to happen, take action now! We are moving in to uncertain territory regarding lending policies, so it is best to reassess your portfolio as soon as possible, before it gets too late. It may get harder before it gets easier, but Zinger Finance have strategies in place to help you try and overcome it.”
Is there any good news?
For First Home Owners and home owners wanting to upgrade their property – yes! This is the best time to strike a deal because there are many lenders available with lower rates and good value from a financial perspective. We understand how important it is to get every box ticked when purchasing your first home, especially when there are so many options available and you are unsure which one is best for you. Hence why it’s important to have the right team helping you in the right way.
Graham says, “Zinger Finance has been helping First Home Owners buy property for almost 4 years. We know the importance of having the right team behind you. The good thing about using Zinger is that we have access to several lenders, allowing us to secure the best finance solution to suit the buyer, so you [as the buyer] don’t have to do all the legwork.”
So, if you’re looking for a PPOR (Principal Place of Residence), whether it be your first or whether you are looking for an upgrade to your current home, the sooner you get started, the better position you will be in to get the right loan products.
If you’re an investor who is looking to expand their property portfolio, the game is not over. However, buckle up ladies and gents – it may be a bumpy ride!