For me, this is the week when I heard the siren in this property cycle. In the media and in my conversations with banks, it’s clear that they are not keen on the risk of lending too much more in a white-hot East coast property market.
I know this sounds tongue-in-cheek but the banks making it tougher to get a loan may well be good news for home buyers.
Here’s a couple of examples of what’s in this weekend’s media.
“CBA raises home loan rates up to 0.5 percentage points.” ABC 21 April 2017
“The great Australian housing boom might be grinding to a standstill thanks to the banks out-of-cycle rate hikes.” Australian Financial Review 22 April 2017
And, here are three conversations with banks I had this week that show that they are pulling their heads in.
- ANZ told me they were no longer taking into account all the self-employed income they used to in considering loan applications
- Macquarie denied a first-time investor loan because the applicant had no credit card (and hence no history of loan repayments)
- ME Bank pulled back from lending as much as 95 per cent of a purchase price to investors
The regulators’ concerns about a property bubble are certainly being heeded and the banks are cooling on property investors.
So, if rates are going up and if it is tougher to get a loan, why is that good for borrowers?
Because, it allows first home buyers to get into the market – where once they were out-muscled by investors.
One broking group recently reported to the stock exchange that there are positive signs amongst the first home buyer market with lodgments lifting back up to 10 per cent – for the first time since the first quarter of 2014.
Once-upon-a-time, before the ‘financialisation’ of the property market, people bought properties because they were great places to live in, even to raise a family in. The next few years will see some rebalancing as (wannabe) mums and dads come back into the market.
Investors will remain an important part of the mix – just that they wont have the primacy they had.
And for home owners, a modest rate rise will be more than outweighed by red-hot prices that are constantly out of reach no matter how much they earn and save.