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Major banks slash interest rates out of cycle, and ease LVRs to lure more property investors; Mortgage War: CBA reduces investor mortgage rates by 40 basis points
Topic Started: 24 May 2016, 12:01 PM (7,453 Views)
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Westpac lowers deposit hurdle for property investors

May 24, 2016, Clancy Yeates

Westpac, the country's biggest lender to landlords, is lowering the size of the deposits it will require from property investors, partially reversing last year's crackdown.

After a sharp slowdown in lending to property investors, Westpac and St George, which it owns, this month told mortgage brokers the maximum loan-to-valuation ratio (LVR) for new mortgages for property investors would rise to 90 per cent, up from 80 per cent.

The change means property investors need a deposit of 10 per cent of a property's value, compared with 20 per cent previously.

It comes as banks are offering more competitive interest rates to property investors in an attempt to boost growth now that this segment of the market is growing well below the Australian Prudential Regulation Authority's 10 per cent a year speed limit.

Westpac's lending to investors grew 7.2 per cent in the year to March, down from growth of more than 11 per cent in the first half of 2015.

While the LVR changes bring Westpac into line with rivals, they also suggest banks are relaxing some of the tighter lending conditions that were introduced last year, as the industry slammed the brakes on lending to property investors.

Aside from Westpac's move on LVRs, banks are offering more competitive interest rates to property investors, with St George on Monday offering cut-price variable home loan rates of 4.24 per cent for investors.

Read more: http://www.smh.com.au/business/banking-and-finance/westpac-lowers-deposit-hurdle-for-property-investors-20160523-gp1i2c.html
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Rufus
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When APRA brought in their new investor guidelines, lenders took a pace back and re-evaluated their exposure to investors. Seasoned investors rarely use 90% loans, that's what new investors of FHB investors use.

This is just the market coming to terms with the new guidelines.

Take risks - if you win you will become wealthy, if you lose you will become wise
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Terry
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Rufus
24 May 2016, 01:20 PM
When APRA brought in their new investor guidelines, lenders took a pace back and re-evaluated their exposure to investors. Seasoned investors rarely use 90% loans, that's what new investors of FHB investors use.

This is just the market coming to terms with the new guidelines.

From a business perspective, banks want to lend as much as possible, seasoned investor or not. I don't think you really understand the biggest risks to Australian banks. Risks are external, primarily the ease of access to wholesale funding and their relative exposure to an interconnected financial system. Internally, banks are a quasi "state owned asset" in that their business model and risk exposure is guaranteed by the taxpayer who also bear all the risks of speculating on houses, which is essentially one of the key drivers of our economy.
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Rainbow
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Terry
24 May 2016, 01:39 PM
From a business perspective, banks want to lend as much as possible, seasoned investor or not. I don't think you really understand the biggest risks to Australian banks. Risks are external, primarily the ease of access to wholesale funding and their relative exposure to an interconnected financial system. Internally, banks are a quasi "state owned asset" in that their business model and risk exposure is guaranteed by the taxpayer who also bear all the risks of speculating on houses, which is essentially one of the key drivers of our economy.
What would a clown know about risk? The clown is scared to take any.
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Blondie girl
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Rufus
24 May 2016, 01:20 PM
When APRA brought in their new investor guidelines, lenders took a pace back and re-evaluated their exposure to investors. Seasoned investors rarely use 90% loans, that's what new investors of FHB investors use.

This is just the market coming to terms with the new guidelines.

Gosh
The banks really care........

:lol
Another thing..

Bank customer says: ""I have plenty of money""
Bank says" But its still in your pocket"
Edited by Blondie girl, 24 May 2016, 03:01 PM.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$
It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged
Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do.
Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
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Rufus
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Terry
24 May 2016, 01:39 PM
From a business perspective, banks want to lend as much as possible, seasoned investor or not. I don't think you really understand the biggest risks to Australian banks. Risks are external, primarily the ease of access to wholesale funding and their relative exposure to an interconnected financial system. Internally, banks are a quasi "state owned asset" in that their business model and risk exposure is guaranteed by the taxpayer who also bear all the risks of speculating on houses, which is essentially one of the key drivers of our economy.
The banks don't need to access funding overseas. They may choose to, but they don't need to. Please don't give me that crap about not being enough Australian dollars in Australia.

If a bank needs assistance the RBA will lend to a bank up to a point and the system is designed to work that way. Past that point it becomes a political decision based on what the government of the day decides is best for the economy. They may choose to rescue the bank, or if need be the bank will be nationalised or allowed to fail.

You have little understanding of bank lending. Perhaps that's because you've never been involved in any. Banks do want to lend as much as prudent lending standards allow, beyond that they are just not interested. That's where you went wrong in your 2009 assessment and that's where you have constantly gone wrong ever since. There is NO PROFIT in bad loans, so naturally they avoid making them as much as possible.

What logical reason can you possibly give me that shows an advantage to a bank who writes poor quality loans?
Take risks - if you win you will become wealthy, if you lose you will become wise
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Terry
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Rufus
24 May 2016, 03:26 PM
The banks don't need to access funding overseas. They may choose to, but they don't need to. Please don't give me that crap about not being enough Australian dollars in Australia.

If a bank needs assistance the RBA will lend to a bank up to a point and the system is designed to work that way. Past that point it becomes a political decision based on what the government of the day decides is best for the economy. They may choose to rescue the bank, or if need be the bank will be nationalised or allowed to fail.

You have little understanding of bank lending. Perhaps that's because you've never been involved in any. Banks do want to lend as much as prudent lending standards allow, beyond that they are just not interested. That's where you went wrong in your 2009 assessment and that's where you have constantly gone wrong ever since. There is NO PROFIT in bad loans, so naturally they avoid making them as much as possible.

What logical reason can you possibly give me that shows an advantage to a bank who writes poor quality loans?
Yep, we know that Australia doesn't rely on the world for funding from an ideological POV. It's very easy for anyone to say that, but it's beside the point.
However, you're not running a bank and working within a banking model that relies on wholesale funding to drive profits.

Furthermore, considering the Australian banking sector comprises much of the core of our economic base in terms of GDP, you'd be deluded to think that the suburbanites are not implicitly underwriting risk.

As for writing "poor quality" loans, that is part and parcel of any business that makes its money from lending. And even if they do, within the context of financial stability, the so-called "savvy" of investors is actually unrelated.
Edited by Terry, 24 May 2016, 04:33 PM.
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Rufus
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Terry
24 May 2016, 04:22 PM
Yep, we know that Australia doesn't rely on the world for funding from an ideological POV. It's very easy for anyone to say that, but it's beside the point.
However, you're not running a bank and working within a banking model that relies on wholesale funding to drive profits.

Furthermore, considering the Australian banking sector comprises much of the core of our economic base in terms of GDP, you'd be deluded to think that the suburbanites are not implicitly underwriting risk.

As for writing "poor quality" loans, that is part and parcel of any business that makes its money from lending. And even if they do, within the context of financial stability, the so-called "savvy" of investors is actually unrelated.
Sure, some loans go bad even when heavily scrutinised during the assessment process. People lose jobs, marriages fail, business fails, there are many reasons why loans fail that are simply not due to poor lending standards, but deliberately lending to poor quality applicants is not a goal of any lender where the lender bears the loss if the loan goes bad.

That is not peculiar to Australia. I would however think that our risk is lower than most OECD nations.
Edited by Rufus, 24 May 2016, 04:49 PM.
Take risks - if you win you will become wealthy, if you lose you will become wise
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Terry
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Rufus
24 May 2016, 04:48 PM
Sure, some loans go bad even when heavily scrutinised during the assessment process. People lose jobs, marriages fail, business fails, there are many reasons why loans fail that are simply not due to poor lending standards, but deliberately lending to poor quality applicants is not a goal of any lender where the lender bears the loss if the loan goes bad.

That is not peculiar to Australia. I would however think that our risk is lower than most OECD nations.
Well of course risk is "lower". The taxpayer is implicitly underwriting it.
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Rufus
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Terry
24 May 2016, 04:51 PM
Well of course risk is "lower". The taxpayer is implicitly underwriting it.
And yet during the worst financial crisis since the great depression the Australian tax payer paid nothing to stabilise the banks.

Weird isn't it.

BTW the other OECD nations have much the same system although the EUZone has some differences.

So how is our risk lower?
Why did you say that?
Take risks - if you win you will become wealthy, if you lose you will become wise
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