In late December just past, APRA announced it will remove caps on interest-only lending, which will give investors more options when it comes time to securing finance but, as one expert explains, more options doesn’t necessarily mean more access in 2019.
The removal of the banking regulator’s 30 per cent cap on interest-only residential mortgage lending has been considered a win for property investors , with Bernard Desmond, mortgage and finance specialist at Loan Market, calling the announcement “a breath of fresh air”.
“A lot of other banks will come back into the full front and open up their offering to investors and that will drive good growth in that investor, interest-only space,” Mr Desmond said to Smart Property Investment.
“It's quite early to make any assumptions, but I’m pretty sure banks will definitely take the lead and come out with their new product offering to investors, which will be catered to family investors who are looking at buying more properties.”
However, he cautioned investors against celebrating just yet, or banking on having the same access to finance as they would've in a bull market.
“Often the product is one thing, but the customer being eligible for that loan is another,” Mr Desmond said.
“Just because an interest-only loan is now available by bank A does not mean the customer’s automatically eligible for it.”
Mr Desmond also said that using a broker opens up more financing options to an investor, as there are financing options that are just not available for those without one.
“There are quite a lot of non-bank lenders who assess it much more leniently, and these non-bank lenders, your average consumers don’t have access to them unless they go to a broker,” he said.
“Most of these non-traditional lenders, they don’t have a retail presence or a branch network, they are solely distributed to third party, to the brokers.”
Mr Desmond said 55 per cent of people seeking finance are using a broker, and he expects that figure to rise, due to the current uncertain nature of the lending environment.
“All this year with the royal commission coming to a close and handing out its final wording in February, I think banks, they will be holding back, sitting back and seeing how it’s going to all play out,” he said.
He also added that he is surprised every time he hears someone insist on borrowing from their own personal bank because they are loyal to the brand.
“If you’re a new lender, if you’re taking your business, you’re rewarded. If you’re an existing customer, you’re not rewarded,” he said.
Regardless of the current conditions, Mr Desmond said there are lenders in the market that are willing to lend, it just may take a bit of time to find them, which can be assisted through the services of a broker.