Lately there has been a lot of publicity around the Australian Prudential Regulatory Authority, which keeps control of the financial system in the banks. If you’re an investor who reads newspaper stories, you could have been led to believe that APRA is making it impossible for you to buy investment properties, your financial dreams have been crushed and you may as well put your head in a hole.
This kind of attitude means they have already achieved their goal of discouraging investors, so let’s take a step back and look at why APRA has directed the banks to hold more capital, resulting in a lot of chatter about reduced loan-to-value ratios and higher deposits and repayments for investors.
APRA, in partnership with the banks, want to ensure that they’re keeping their growth of investor loans to 10 per cent, as a standard. The easiest way to do this is to create fear around the fact that you can’t get money any more. If you believe this, you probably won’t even bother applying, which means the problem has solved itself.
Others can see through this and want to continue adding to their portfolios. Put simply, banks are billion dollar corporations that make billion dollar profits and have millions of share holders; they are not going to make any rash, overnight decisions which will seriously affect their profitability or client base.
All of this just means that you have to be a bit smarter and a bit more willing to shop around and not take no for an answer. Through brokers who understand investment, I know that there are lenders out there doing 90 and 95 per cent loans, plus lenders mortgage insurance and these lenders will calculate your existing debt at existing repayments, not load it up to eight per cent like some banks. So there’s a whole range of options out there and there are still suitable loan products for investors.
The other thing to think about is that the big banks have the most investor clients and highest percentage of investor loans, so they’re going to be hardest hit by these regulatory changes and receive more media exposure. Just because a bank is a second tier lender (not one of the big four or their subsidiaries) doesn’t mean they are any less stable or don’t have good loan products. These lenders can be seen as secondary options, with higher risk profiles but in reality money is money and they get it from the same wholesale places that the big four do! So explore your options because there are still plenty of products out there that can work for investors and won’t limit your ability to continue to grow your wealth; you just have to look a little bit harder to find them.
Director of OpenCorp, Cam McLellan is committed to sharing his passion and property investment knowledge with everyday Australians.
After thriving in the telecommunications, technology and recruitment sectors and making the BRW Fast Starters list twice and the Fast 100 list three times in 8 years, alongside accomplished OpenCorp entrepreneur and brother-in-law Allister Lewison, founded OpenCorp eight years ago.
Cam started investing in real estate at a young age and quickly mastered the art of building sustainable wealth. He has used the same wealth building strategy to develop a multi-million dollar business, sharing his knowledge and skill with ordinary Australians. Cam has personally bought, sold and developed numerous properties and has an extensive residential and commercial investment portfolio.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.