As Australia’s banks continue to tighten their lending policies for the investor market, a prominent broker believes the new landscape will reward brokers and their clients for their loyalty.
Mortgage broker and director of wHeregroup Todd Hunter, whose business is based around property investors, believes the new regime will increasingly reward loyalty, and brokers and borrowers determined to spread their loans between lenders are likely to struggle.
“There are two types of mortgage brokers. There’s the mortgage broker who believes that you should do all your lending with one lender – it doesn’t have to be cross-collateralised. And then there’s your mortgage broker who believes that every property should have a different lender because you don’t want the banks touching all the properties – which is completely unjustified and I don’t believe in that at all,” he said.
“But with all the new policies that are coming out, the banks are only going to discount loans for loyalty.”
Mr Hunter said “loyalty is going to come into play for the banks big time”, and brokers may need to adjust their mindsets in order to get the best deals for their clients.
In addition, Mr Hunter said he expects there to be a big drop in investor enquiries, but noted that the raft of changes will more adversely affect one group of borrowers.
“Those who are looking to do a one-off purchase on investment properties – I think they’re the ones who are going to suffer the most,” he said.
“Those people who feel priced out of the Sydney market so were going to buy just one investment property elsewhere, they will suffer. But the home owner who has good equity and wants to invest – I don’t think it’s going to affect them too much.”
SQM Research managing director Louis Christopher agreed, but said it is difficult to predict what impact these moves will have on the market.
“The impact upon the investor market will be fairly modest at this stage. It’s mainly going to affect investors who were right on the line, right on the threshold of whether they were actually going to get a loan or not – and that’s only a relatively small segment of the market in the scheme of things,” he said.
Mr Christopher said there was no doubt these measures had been designed to keep some investors out of the market and “to keep some investors at bay who were right on the threshold of serviceability and being able to do this [investing] to begin with”.
Pink Finance’s Nicole Cannon said investors and brokers have an interesting few weeks ahead of them as more banks are expected to review their investor lending policies.
“There is a whole raft of different measures which could come into play – whether it be loan-to-value ratio restrictions or negative gearing calculations – which the banks could use to try to slow down the investor market,” Ms Cannon said.
“All it takes is one bank to start the process and then they can all start to follow suit.”
Mr Hunter also pointed to the effects the raft of restrictions could have on the wider property market. He said the changes being announced by the banks, the governing bodies and the ATO mean the Sydney market is “done” and investors need to keep a close eye on new developments.
“Banks are servicing your loan application at the seven per cent mark,” he said. “This is a protection mechanism to safeguard you when interest rates rise in the future.
“This seven per cent mark hasn’t shifted in the last three to five interest rate drops. So no matter how much the rates still go down, your ability to service more debt will not increase unless your income does.”
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