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Fastest home loan growth in 12 years as banks target upgraders: Owner-occupied lending up 6.1%; ABS 5609.0 - Housing Finance, Australia, August 2015
Topic Started: 9 Oct 2015, 02:26 PM (5,528 Views)
peter fraser
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jrsnr
10 Oct 2015, 06:34 AM
also notes a), b), and c), from ABS on data, in particular a) owner occupied date includes refinancing, and c) investor data excludes revolving credit

is this to mean that if i had an investor loan and refinanced to owner occupier it is now counted, but if it is investor and is refinanced as such it does not count?

could this skew figures too?
yes it would skew the data, but if they do live in the house then they can advise the bank and have the classification altered without the need to refinance. It's a simple process so I doubt that it would cause a major difference to the data.

But there will be noticeable differences in the data due to other factors.

Previously it just didn't matter whether an IP buyer stated that they would live in or rent the house out, except for the different way serviceability calculations were done. Under the previous model it was easier to get a home loan by stating that the house was to be an IP and then the expected rent would be included, and so too would the tax benefits be included. So the number of IP buyers was probably overstated until now. The data was wrong on the upside. People tell untruths to get home loans, but they do have the option of renting it if they do struggle.

All of that has now changed with a number of lenders, and in many instances it is better to declare that the home is for owner occupation, partly because of the 0.27% interest rate difference, and partly because higher LVR's are achievable for PPOR's. There will be many IP buyers who will choose to claim that they are buying a place for them to live in because that enables them to obtain a cheaper loan, and borrow a higher amount, and in their circumstances that is important to them.

There will be others who already own a house and wish to buy another. Why would they tell their bank that they are buying an IP, when they could approach a different lender and tell that lender that they intend to occupy the house they are buying, and rent their existing house out. The serviceability calculations will be roughly the same, but the interest rate will be 0.27% lower on the new house, and unaltered on the existing home loan as they won't say boo to their existing lender. People will tell untruths to get a better rate and a higher LVR.

This is virtually impossible to police, and in any case the lenders would prefer not to know. So now I expect the number of IP's to be understated and the future data to be wrong on the downside.

The combination of previous overstating and the new regime that encourages understating should be enough to get the data back within the APRA target range, and I think we will achieve that before Xmas 2015. Everyone will claim a victory, but really little will change.

Edited by peter fraser, 12 Oct 2015, 09:48 AM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Ex BP Golly
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Mixed messages eh!

http://m.smh.com.au/business/banking-and-finance/banks-shy-away-from-wholesale-debt-markets-reflecting-weaker-demand-for-credit-20151009-gk5ljm.html
Banks shy away from wholesale debt markets, reflecting weaker demand for credit
October 11, 2015 - 3:54PM
The big banks are raising less money from big investors after a rise in wholesale funding costs.

By CLANCY YEATES
Australian banks are raising less debt from big domestic and international investors, as market volatility pushes up wholesale funding costs for the country's largest lenders.
The drop-off in bond issuance from the major banks may also signal softer economy-wide demand for credit, as the investor mortgage market that has powered housing credit growth shows signs of cooling off amid regulatory pressure on banks to curb lending to property investors.....credit market specialist with ADCM Services, Philip Bayley, said about $85 billion in debt owed by the big banks would mature on global markets this calendar year, and so far they had raised about $70 billion.

Similarly, he said about $25 billion in domestic debt would be maturing, but banks have raised about $22 billion.

"The banks have not been as active in bond markets this year. That's both domestic and international," he said.

"In past years we've seen issuance exceeding maturities. As the banks are growing their loan book you would expect to see that happen."

This year, however, Mr Bayley said the banks were likely to only replace maturing debt, rather than raise additional funds.....A key proxy for bank funding costs, the cost of insuring against a default by a bank, in recent weeks rose to its highest point in two years.

Banks have also raised more than $15 billion in equity funding through capital raisings this year, so that may mean they have less need for extra wholesale debt.

The lower fund raising could also reflect softer credit demand due to a slowdown in borrowing by property investors, who until recently accounted for almost half of the growth in housing credit.

Edited by Ex BP Golly, 12 Oct 2015, 10:32 AM.
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Shadow
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peter fraser
12 Oct 2015, 09:39 AM
All of that has now changed with a number of lenders, and in many instances it is better to declare that the home is for owner occupation, partly because of the 0.27% interest rate difference, and partly because higher LVR's are achievable for PPOR's.
I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate.

They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)

PS: Rastus ate my goldfish and defiled himself in a public art gallery. I have proof.
Edited by Shadow, 13 Oct 2015, 11:37 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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ThePauk
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Diamond Member
Peter W says the rise is bogus.


http://petewargent.blogspot.com.au/2015/10/housing-finance-shock.html
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peter fraser
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ThePauk
12 Oct 2015, 12:14 PM
Pete was quoting Chris Caton. It's healthy to have a range of opinions, and Chris is a very smart guy who is always worth listening to. However on this occasion I have a different view although I can't say absolutely that he isn't correct. The banks will probably clarify this in due course.

Any expressed market opinion is my own and is not to be taken as financial advice
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Poontang
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Shadow
12 Oct 2015, 11:34 AM
I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate.

They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
How does this tactic stand with the ATO? Claiming deductions on a loan that is of personal business and not investment though.
There are some people who seem angry and continuously look for conflict.
Walk away, the battle they are fighting isn't with you, it's with themselves.

The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it.
The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.

Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
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peter fraser
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Poontang
13 Oct 2015, 12:48 AM
How does this tactic stand with the ATO? Claiming deductions on a loan that is of personal business and not investment though.
it's simply not a factor.
Any expressed market opinion is my own and is not to be taken as financial advice
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Shadow
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Poontang
13 Oct 2015, 12:48 AM
How does this tactic stand with the ATO? Claiming deductions on a loan that is of personal business and not investment though.
Nothing to do with the ATO or deductions.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Rastus2
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Shadow
12 Oct 2015, 11:34 AM
I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate.

They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)

Quote:
 
They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)


Oh dear... so that would be misleading, by omission Shadow. :re:
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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Ex BP Golly
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Rastus2
13 Oct 2015, 08:53 AM




Oh dear... so that would be misleading, by omission Shadow. :re:
Our national standards have slipped over the decades.
Once was a time you'd put the garbage out.

Not today.
We stick it up on a soapbox and oooh and aaah admiringly as it wanks for the crowd.
WHAT WOULD EDDIE DO? MAAAATE!
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