Experts give their opinion on AMP investor withdrawal

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AMP’s decision to pull out of the investor lending market has been met with surprise from people around the property industry.

The non-major yesterday announced that it would stop lending to investors until late 2015 in response to the Australian Prudential Regulation Authority’s (APRA) push to reduce investor lending across Australian institutions.

Ian Hosking Richards, chief executive officer of Rocket Property Group said the move was one that caught him off guard.

“I can’t understand the decision, banks at the moment are just turning people and business away,” Hoskings Richards said

“The thing is though there are plenty of other avenues out there for people to get finance, so I can’t see how banks are just going to stand around turning business away while people look elsewhere.”

Hoskings Richards said AMP’s decision may have been driven by a change in attitudes post GFC, but he also believes it comes with some risk for the bank.

“I think we’re seeing the post GFC difference at the moment, it used to be lenders were ruled by the market side of things and they wanted to get as much of the market as they can, now they’re controlled by the credit division who will tighten things up quicker.

“Macquarie Bank did the same during the GFC and they’ve come back now, but I think withdrawing from the market definitely damaged them and their reputation.”

Hosking Richards believes it’s likely that at least one more lender will make a similar decision, but Joe Sirianni, director of broking firm Smartline believes that is unlikely.

“I’m surprised, it’s definitely a concern when a bank pulls out of lending, I’d heard they were considering it but I didn’t think they would,” he said.

“It depends on a few different things, but I couldn’t see any of the major banks or anyone else doing it, what AMP have done quite dramatic.”

Multifocus Properties & Finance chief executive said from his understanding AMP were in a much different situation to other lenders.

“From what I understand, AMP run their mortgage books from January to December unlike other lenders who run from July to June and effectively they had hit their limit for the year and the only way to not breach APRA’s guidelines was to do something drastic,” Brach said.

“In that sense I can’t see other lenders jumping in and doing something similar, I think we’ll just see them carry on tweaking their systems to keep investor lending growth under that 10% year-on-year limit.”

While many were surprised, Naomi Beaumont, finance coaching expert from Positive Real Estate said she wasn’t too shocked given the state of AMP’s books.

“I wasn’t really surprised, when you look at AMP 85% of their lending is to investors and with APRA targeting loan books you can see why they did it,” Beaumont said.

“What did surprise me a little bit was the timing of it and how quick they did it.”

While AMP’s decision may hurt some possible investors, Beaumont said it was a good move for the market as a whole.

“I think it’s a great thing, over a 15 or 20 year run we always see these types of things and what it does is cause everybody to tighten up and take a step back.

“It resets the market and that’s something that needs to happen, we’ve had clients buy a house for $500,000 and sell it two years later for $850,000 and this is the market’s way of saying that can’t keep going, let’s reset and then go again.”
 

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