Lately we’ve been playing catch up. Lenders adjust their rates so often that, at times, as soon as we’ve issued a price comparison to a client, it’s out of date – made redundant by the aforesaid changes that lenders put into affect.
When the price changes are in the client’s favour, it’s an easy conversation. However, when they’re not…well, that’s why they pay us the big bucks (or do they?).
In the main, these changes are to mortgage rates – both investment lending and owner occupied.
So why does this happen so often? I’ll try to explain it this way…
The banks have had growth limits imposed on them by the regulator, APRA. Effectively, they can’t grow faster than 10% above what the entire market is growing by.
When banks fall short of this growth target in any particular category, they adjust their rates down to attract more customers. As soon as they get their fill, rates are adjusted back up again.
When they are growing too fast and look like they’re about to over achieve, they adjust the prices up…you get the idea.
So why did the regulator impose these price targets?
APRA felt that the property bubbles in the capital cities meant that Banks’ balance sheet were getting dangerously over filled with housing loans. It effectively placed a speed limit on their growth.
This, in conjunction with other measures has meant that borrowing from banks is getting more difficult every day. Just this year we’ve seen the following restrictive measures:
- A cessation of lending to non-residents
- Introduction of real world servicing calculators. This was long overdue.
- A restriction on lending to people with more than four investment properties.
- An increase in prices for investment loans.
- A reduced reliance on rental income from investment properties – from 100% down to 75% or lower.
- Some income not being used for servicing – like bonuses – by some lenders.
- Not lending on ridiculous LVR’s (like 100%).
So, when you get asked for more information from your broker remember that the quote they gave you at the time was not wrong. It was simply out of date.
Probably due to a paranoid banker making sure they tick a new box.