Navigating lending changes ‘a game of chess’, says broker

He likens the current environment to a “game of chess” and says he needs to be prepared for potential movements by lenders ahead of time.

“You've got to think two or three steps ahead because we know bank policy's going to change,” Mr Christie-David told The Adviser. “We know your own situation's going to change. Your job situation, or you're going to have another child, for example, so we know this all in the background because we've spoken to our clients enough as well.”

Atelier Wealth has now begun recommending more principle and interest loans to its property investor clients. Mr Christie-David says the banks “aren’t loving” interest-only borrowers or loans at the moment.

Last week a number of banks, including three of the four majors, announced further rate hikes for interest-only borrowers on investment loans. At the same time, banks have started reducing rates for P&I borrowers.

Following 18 months of significant property prices growth and record low rates, Mr Christie-David says borrowers should be using any surplus cash to pay down their debts.

“Having those conversations with clients isn't easy because they think you're mad sometimes to recommend P&I on an investment property, but … now those ones are coming to the fore,” he said.

However, he adds that understanding the client’s needs and goals was key.

“If your goal is to have maybe one or two investment properties paid off, then why wouldn't you just pay if off now? You've got the cash flow to do it,” Mr Christie-David said.

“Otherwise the option is to sell one property and then have the cash to reduce the loan balance, for example.”

The Australian Prudential Regulation Authority introduced limits on interest-only lending in March.

[Related: A husband and wife team on why brokers need more education]