Mortgage brokers from across the country have slammed the prudential regulator’s investor lending curbs, explaining the knock-on effects the measures have had on their clients.
Asked how the changes have impacted the third-party channel, brokers have spoken out about how pricing and policy changes – a reaction by the banks to increased regulatory pressure from APRA, as well as higher capital requirements – are now creating unintended consequences and distorting the market.
South Australian broker and Go Loans director Simon Norris told The Adviser that “there are so many flow-on effects from the recent changes”, he wonders whether many of them were considered by APRA before its “scatter gun approach”.
“To start with, what were APRA trying to achieve? We would be led to believe [they wanted] to suppress the appetite of investors,” Mr Norris said.
“What could they have done? Perhaps lower LVRs on new investment loans, increase rates (providing lenders more coverage) and perhaps make some of these amendments postcode specific (many of these changes are driven by the heated Sydney and Melbourne markets).”
Mr Norris said he has seen existing investors get “smashed” by the changes.
“How is lifting an existing investor’s rate by 47 basis points impacting on new investors? This poor investor set up a portfolio of four properties over 10 years ago in an effort to be self-sufficient in retirement and not have to rely on a pension. The thanks he gets? Lenders gouge to increase their burgeoning profit and he gets to pick up the bill.”
Mr Norris said that if the lending curbs begin to deter investors from the market, supply and demand dynamics could potentially become imbalanced.
“If the pool of investors reduces then so does the need for properties to be built,” he said. “Less properties means an increasing imbalance in the supply/demand equation ultimately pushing prices up.
“Less properties being built means less employment, less employment means less tax revenue for the government and an increased welfare reliance.
“So we sit back and watch the calamitous impact. The banks get stronger on the back of the little people and bureaucrats get away with making poor decisions with massive impacts. The lucky country is in danger of imploding.”
Meanwhile, the changes have started to contaminate the commercial mortgage market, according to one Sydney broker.
Byblos Finance CEO George Karam, a commercial and development finance specialist, said that while there’s much talk, discussion and information about the changes affecting investor home loans, there are unintended consequences that have not received as much attention.
“That is, the effects these changes have had on the banks’ lending appetite on development finance,” Mr Karam told The Adviser.
“There is certainly a nervous energy that these changes will increase the completion risk of presales and lending has become tighter and tighter.”
Brokers also shared their thoughts on how clients are taking the news that they now have to pay more for their investor loans.
Melbourne broker Nathan Taddeo of Credo Financial Group said he has seen mixed reactions.
“What is interesting is the range of reactions we’re experiencing from new clients when we tell them that their investment loan will be more expensive,” Mr Taddeo said.
“Obviously no one likes to pay more for something, but we’re yet to experience anyone kick up a stink to the degree we worried about.”
One broker taking advantage of the changes is KeyInvest Lending Services’ Andrew Harrison. The South Australian broker said the changes have been “fantastic” for his business.
“The organic growth of my business has been incredible since the changes began in May ... I positioned myself to take on the changes in investor lending and APRA intervention as a positive opportunity to bring my skills to market,” he said.
Over 80 per cent of the loans Mr Harrison negotiates are mortgages for property investment.
“The one constant in my career has been change and the only thing that is guaranteed in future is that there will always be change so why not embrace it,” he said.
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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