The finance market is changing.
Given up on getting a loan? It may be time to revisit your options with a finance strategist.
Recent changes in the finance market and in the world of lending mean that some people who were stuck a year or two ago may be able to finally move forward.
Have you been sitting on the fence?
When APRA brought in lending restrictions in 2014, many property investors found themselves stuck. A lot of people couldn’t service to pull out equity and buy their next property.
Others couldn’t get a loan at all. An assessment rate of 7.25% as well as strict servicing requirements put many borrowers out of the running completely – but all of that has started to change.
“You may have been rejected in the last two years,” says Nathan.
“Things are changing on a regular basis.”
“Interest rates have started to come down and APRA has changed lending laws,” he says.
“This means that some people that were sitting on the fence beforehand might be in a position now to take action.”
What has changed?
Just a few weeks ago in June 2019, the RBA dropped the cash rate to a record low of 1.25%. This was the first rate cut in almost three years, with the four major banks and some smaller lenders quickly following suit.
According to Nathan, this could make a difference to the serviceability of many lenders.
“If they reduce interest rate costs, the cost of lending is cheaper,” he says.
“A quarter of a percent interest rate means that someone could service for an extra couple of grand a year.”
Interest rates are just one part of the story.
A month prior to this, APRA sent out a letter to ADIs with a proposal that would potentially allow people to borrow more.
APRA proposed scrapping the existing assessment rate of at least 7% and suggested that lenders could set their own minimum interest rate floor to use in serviceability requirements. It suggested an interest rate buffer of 2.5% – a change that would help the serviceability of many borrowers.
In 2018, APRA removed the benchmarks on lending to investors and interest-only lending that they had brought in during 2014. This eased pressures to reduce the amount of investor loans on the big four’s books.
Who may benefit from these changes in the finance market?
According to Nathan, there are a lot of people out there who may have been worn out and tired of looking at finance. They could have been rejected countless times and given up on ever being approved.
There are also people who are paying higher interest rates and stuck in their mortgages.
To these people, Nathan says now is the time to review their situation.
“It’s important for people to constantly be looking and searching for a better opportunity,” he says.
He says the slight changes that are starting to occur means these borrowers may be able to refinance for a cheaper interest rate. It means that they may be able to service to pull out equity and buy more properties to improve their position.
Staying ahead of the game.
It is important to keep informed about changes in the market so you can take advantage of opportunities when they arise. Nathan says now that the property market has hit its lowest point it is time to accumulate assets. [https://binvested.com.au/property-market-trends/]
“A lot of people didn’t prepare for the GFD. Are they preparing for the next run of growth?” He asks.
Speaking with a finance strategist will help you find out how your situation has changed so you can move forward with your investing.
Zinger has been financing people and helping them make money through the good times and the bad times – and not everybody can say that they have done that.