Blog: Will We See Big Changes Ahead in 2018?
07 January 2018
We have experienced a raft of changes to home lending policies in the last 12 months.
Here’s a quick recap of some of the bank policy changes that impacted borrowers:
- Increasing postcode restrictions
- Adapting the use of Debt-to-Income Ratios
- Changing views on negative gearing
- Increasing rates for investment loans
- Changing views on existing debts
- Reducing (or removing) rental income in servicing
- Increasing rates for interest-only loans (more in this below)
- Providing discounts based on the Loan to Value Ratio
- Increasing default living expenses
- Enhancement in Verification of Identity requirements
Many of these changes were driven by the Interest Only speed limit from APRA (see my previous post for more info). The move appears to have worked, with APRA announcing the number of interest-only loans held by the banks dropped by around $36 billion just in the last six months of 2017.
As a mortgage broker, these changes were a test of agility. We needed to be aware of policy changes immediately to gauge the potential impact on current and future clients.
Despite everything that happened last year, some are suggesting that 2018 will be the year getting a mortgage will become harder.
So what’s next?
For starters, there is a Banking Royal Commission commencing this year. Not only will the commission make recommendations for the Government to consider, there’s a good chance that many banks will make changes pre-emptively (which many have already if you consider moves such as abolishing foreign ATM fees).
Also, APRA has vowed to continue its focus on reinforcing prudent lending standards and practices in the banking sector. The trend of switching to from Interest-Only to Principle and Interest loans may continue in 2018, and is an important transformation that brokers can continue to assist their clients with. Given this focus on investment property, it’s safe to say that savvy Owner Occupiers will continue to benefit from competitive lending rates. This is why it’s important to review your home loan regularly, regardless of what is going on in the industry.
Let’s not forgot the Reserve Bank of Australia either. The RBA have kept the official cash-rate on hold since August 2016. Whether or not they raise interest rates in 2018 is unclear, however it is highly unlikely they will decrease in the near future. Some households may wish to use this period of low interest rates rates to pay down debt as no one can say what’s around the corner.
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About the Author
Tim has an in-depth knowledge of the Australian mortgage sector makes the loan process simple and stress-free. It pays to have him on your side, whether for the purchase of a new home or seeking a better deal on your existing loan.
Known for his accessible style and warm approach, Tim believes that educating people about their mortgage will help them to achieve their financial goals sooner. By sharing his expertise openly, some of the people he educates will likely become his clients. It’s a win-win approach. Valuable information, no obligation.