CURRENT LENDING ENVIRONMENT

LENDING UPDATE

This week the Reserve Bank's Phil Lowe announced that "A stronger recovery is possible if there is further substantial progress in containing the coronavirus in the near term and there is a faster return to normal economic activity." With Scott Morrison’s staged return announced yesterday, let’s hope we see a return to a more normal state soon. Although I suspect it will be a different normal for a while yet.

The lending landscape, continues to operate like a game of snakes and ladders.  APRA revealed yesterday that while full serviceability assessments would continue to be required for new lending, it would temporarily ease guidance for changes to existing loan terms, including the conversion of a principal and interest (P&I) loan to interest-only (IO).  This is really saying that they support the banks in offering non-standard interest only periods to customers in trouble.

For new loan applications banks are now focusing heavily on the industry that you operate in and your socio-economic demographics which has had a big impact for many people who have been heavily impacted by covid 19. Key industries such as tourisim, hospitality and entertainment (and their suppliers) are all being heavily scrutinised.

Generally speaking, all banks have changed their serviceability criteria which impacts peoples borrowing capacity. But banks are still lending and we are still getting all of our applications approved.  it’s just taking more time and we are being a little more considered in our approach.

With respect to interest only loans, banks reset policy and made it much harder to simply roll over IO loans about 2 years ago. If you have IO loans expiring within the next six months, or have friends, colleagues and family that need help resetting IO loans please contact me and we’ll explain all the options.

RATES

A recent ACCC inquiry into bank interest rates found that long-term home loan customers with the big four banks are paying interest rates an average of 0.26 of a percentage point higher than new customers. In our experience this is more like 2-3 times this amount when we are looking at new clients that have gone directly to the bank themselves. So please refer your friends and family to us as we’d love to help them if they’re looking to save money.

I occasionally have existing clients contact me and ask me whether I’m aware that their interest rates have increased. Unfortunately, banks will sometimes, not always, try and rachet rates up over time on our customers and because I don’t have access to your accounts after the loan settles, I don’t know this unless you tell me. So if you think this may have happened, it’s a simple fix. Please get in touch and we’ll follow this up with the bank on your behalf to make sure that your loans are still competitive. Remember we work for you and not the banks.