Owner-occupiers may get cheaper loans than investors due to APRA cap

Posted by Henry | HOME LOANS,INTEREST RATES | Tuesday 19 May 2015 8:22 am

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Home owners paying off a mortgage on the house they live in are on the way to becoming the new prime customer for the nation’s banks.

Facing new rules on lending to investors, banks are set to fight hard for borrowers who intend to live in the home they are borrowing against and that could mean bigger interest rate discounts for these customers.

Just this month a wholesale lender owned by National Australia Bank introduced larger discounts for new owner-occupier borrowers than new investors.

“We’ve got a bigger discount for owner-occupied lending than we have for investor lending,” said National Australia Bank’s executive general manager of growth partnerships, Anthony Waldron.

“It’s a direct response to us having a higher appetite for owner-occupied lending.”

NAB's Anthony Waldron image www.australianmortgageloans.com.au

NAB’s Anthony Waldron says the bank has ‘a higher appetite’ for owner-occupied lending. Photo: Daniel Munoz

The reason is that the Australian Prudential Regulation Authority, which maintains the safety of the banking system, is demanding that banks slow investor credit growth to less than 10 per cent a year, meaning banks must compete for other customers.

Mr Waldron said the bank’s wholesale white label lending business, Advantedge, which sells loans through brokers under different brand names had this month introduced changes that meant new owner-occupier borrowers received deeper interest rate discounts than investors.

Advantedge​ is offering owner-occupiers a discount that is about 15 basis point larger than the discount given to housing investors, he said. The change does not apply to NAB-branded loans, but it could be a sign of things to come.

Mr Waldron said each bank would respond to APRA’s 10 per cent growth cap differently, but the “differentiated pricing” approach may become more common, as banks seek to expand in home lending while still complying with APRA’s cap.

“Within a 10 per cent cap, I think you will see that play out more and more over the next few months, as we see people really try to grow their owner-occupied books and operate within the guidelines as set out by the regulator,” he said.

It follows Westpac’s comment earlier this month that it would apply tougher tests to new property investor borrowers when assessing how they would cope with higher interest rates.

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The focus on investor lending comes amid signs the Reserve Bank of Australia is torn between cutting interest rates again to push the local currency down and further stimulate investment and holding them to prevent over-indebtedness in Australian households, according to one senior board member.

Deputy governor Philip Lowe told an investment conference in Sydney on Monday that it was not in Australia’s long-term interests to “engineer” a debt-fuelled consumption boom through a low cash rate.

“This is especially so when debt levels are already high and prospects for future income growth are not as positive as they once were,” he told a gathering of chief financial officers.

The comments come on the back of fears from ASIC chairman Greg Medcraft about property bubbles in Sydney and Melbourne.

At the same time, however, monetary easing around the world had stymied to some degree attempts by the RBA to lower the value of the Australian dollar to accommodate the economic transition away from resources-related investment.


Henry Sapiecha

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Posted by Henry | INTEREST RATES | Tuesday 5 May 2015 10:57 am

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THE Reserve Bank has cut the official interest rate by 25 basis points to 2% as predicted by economists.

The cut could save a borrower with a $300,000 mortgage around $47 per month in repayments if it is passed on in full by the banks.

At its monthly meeting today, the Board lowered the rate to the historic low, sighting Australia’s ‘falling trade terms’ as one of the reasons.

“The global economy is expanding at a moderate pace, but commodity prices have declined over the past year, in some cases sharply,” a statement released by the RBA read.

“These trends appear largely to reflect increased supply, including from Australia. Australia’s terms of trade are falling nonetheless”.

“The Federal Reserve is expected to start increasing its policy rate later this year, but some other major central banks are stepping up the pace of unconventional policy measures. Hence, financial conditions remain very accommodative globally, with long-term borrowing rates for sovereigns and creditworthy private borrowers remarkably low.”

The Australian dollar initially dipped following the RBA’s decision but has since bounced back.

The cut is effective as at May 6, 2015.

CoreLogic RP Data head of research, Tim Lawless says the RBA is in a tough position, trying to stimulate economic growth without adding more fuel to the housing market demand.

“The Sydney and Melbourne housing markets are already responding to lower mortgage rates; since the previous interest rate cut in February,” said Mr Lawless

“CoreLogic RP Data have reported auction clearance rates moving to new record highs and the annual trend in capital gains has rebounded higher after moderating over most of 2014.

“The RBA are clearly prepared to look through the strong housing market results, as they should be well aware that the high rate of capital growth is evident only in Sydney where dwelling values are up 14.5% over the past twelve months and Melbourne where values have moved 6.9% higher.

“Every other capital city is recording annual growth in dwelling values of less than 2.5%.

“With mortgage rates now moving even lower we are expecting dwelling values will continue rising, however it is hard to imagine the high rate of capital gain in Sydney won’t start to moderate over the coming months as investor demand is curbed by tougher lending standards for investment loans and also by diminishing rental yields and affordability.

“Potentially we may start to see stronger housing market conditions in cities like Brisbane and Adelaide where capital gains have been relatively muted over the past two cycles of growth.”


YOUR home loan repayments could be just a touch cheaper after today with the Reserve Bank of Australia expected to cut rates when the board meets later today.

It would be the second time this year the RBA has cut rates.

That February reduction was the first time in 18 months that the RBA felt compelled to tinker with the figures.

If it is cut, those paying off an average mortgage of $300,000 over 25 years would save less than $50 a month.

Financial news network Bloomberg found 23 economists out of 27 were predicting interest rates to tumble another 25 basis points or a quarter of one percent, bringing the rate to an all-time low of 2%.

To put this number into context, when the cash rate was first established in 1990, it sat at 17%.

It gradually fell throughout the 1990s and into the noughties, with a few exceptions, reaching a record low of 3.5% in late 2009 as the Global Financial Crisis began to bite into Australian industry.

The rate briefly recovered, but returned to 3.5% in October 2012 and has been gradually falling since.


Henry Sapiecha


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Posted by Henry | Uncategorized | Monday 4 May 2015 1:59 pm

Property investors face tougher loans

Westpac chief executive Brian Hartzer says the bank will also tighten its lending to foreign investors in real estate.

4:05pm | Westpac will apply tougher tests to new property investor borrowers when assessing how they would cope with higher interest rates.


Posted by Henry | BORROWING LENDING,FACTS,MORTGAGES,SAVING | Friday 1 May 2015 12:01 pm

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Did you know that if you make repayments fortnightly you can repay a principal and interest loan faster?

A lender will typically calculate your loan repayments monthly. But if you can pay half the required monthly amount each fortnight instead of monthly, you’ll effectively make one extra repayment in every year of your loan. This can be easy to do if you can schedule your payment with your pay cycle, and you can save thousands in interest repayments over the life of your loan.

For example, say over 30 years you pay the principal and interest of $2,197 a month on a $400,000 loan with a variable interest rate of 5.20% pa. If you make fortnightly repayments of $1,098.50 you could save $73,840 in interest1.

Take control of your finances

By creating a budget and understanding your cash flow, you will be able to take control of your finances and put in place the necessary steps to pay your loan off sooner. While making one extra repayment annually may not seem like much now, you will stand to save thousands on the interest you pay towards your home loan in the long run.


Henry Sapiecha

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