Various lenders have been upping their rates and shifting their serviceability requirements so this month we ask...do you think more banks will tighten their lending criteria this year?
"Already happening"
This has already started, especially in the over 80 per cent LMI space. Obviously with the directives given by APRA in 2015, we have seen some belt-tightening but we seem to be going through a period of policy change at present.
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One thing lenders can’t seem to grasp is the shift for employers to employ staff on a casual basis – this is a reality of employment today.
The tightening of lender policy [can be seen] through the valuation process. It seems the valuers’ governing body, the Australian Property Institute, sends directives to their members without consultation of key stakeholders and without regard to the effect it has on lender decision-making. We then spend the next 12 months getting lenders to understand the changes.
I think there should be an industry body meet with key players in our market on a regular basis to ensure we don’t have major disruptions like we have had in the last couple of years.
-- Steve Milligan, Launch Finance
Changes good for brokers
We think that the banks have already started to tighten up their lending criteria and believe that they will continue to do so throughout 2016.
We predict that assessment rates will increase and there will be a lot of spotlight on customer-declared living expenses.
We also believe loan-to-value ratios will start to reduce for high-density units in metropolitan cities around Australia, as there are concerns of oversupply and under-demand for these properties.
This, however, is positive for mortgage brokers, as with so much change it makes us more attractive to customers.
-- George Samios, Madd Loans
More rate rises
Tightening of lending criteria in 2015 specifically targeted investors with higher interest rates and tougher lending hurdles for existing debts.
Recent focus has been on living expenses for all applicants and soon we will see lenders’ attention switch to owner-occupiers kicking off with [a focus] on interest-only loans.
With out-of-cycle rate rises expected in 2016, the lenders are sending a very clear message that the good old days are long gone.
Next we will start seeing niche policies take a hit.
-- Jane Slack-Smith, Investors Choice Mortgages
More to come
Yes, I think they will, particularly in light of changes in banking regulations that will require banks to hold more capital against loans.
The changes may result in opportunities for loan customers living in their own home and present challenges for other borrowers, such as investors.
In any case, I think that mortgage brokers will be able to add more value than ever to the process of obtaining a loan.
I see it as a key part of my role to constantly monitor the changing environment and to understand and explain what it might mean for my clients.
-- Cathy Anderson, Smartline Personal Mortgage Advisers
It will continue
They will continue to tighten their appetite for property transactions, particularly for development finance.
The greatest tightening will be expected for speculative transactions including:
• Speculative site finance, including property with development potential.
• Development funding where the transaction is not ‘funding ready’ i.e. not all preconditions of finance have yet been met.
Furthermore, expect increase in funding costs as the request for property finance starts to outstrip the supply.
-- George Karam, Byblos Finance
