Mortgages the new class of borrowers as loan rules become more stringent

Published

July 25, 2018 07:56:42

Mozo found that mortgage holders who borrowed near their limit in recent years found a legion of "mortgage lenders," according to the interest rate comparison website

. It is increasingly difficult to refinance their loans and they are "trapped" with their current lender.

"A mortgage borrower is a homeowner unable to move to a more competitive mortgage transaction even if he has satisfied all the repayments. "Generally, it's because they've contracted the loan before stricter loan rules are applied."

Mr. Jovcevski stated that wages were stagnating and falling.

"Stricter lending criteria were introduced for good reason, with the explosion of household debt, weak income growth and historically low interest rates."

" The effect of training is 30 percent of homeowner borrowers now finding themselves facing mortgage stress – and many are also falling into the category of mortgage prisoners, "he said, citing research from Digital Finance Analytics.

"When a customer is essentially tied to a supplier, he is at the mercy of the rate of increase or conditions that the bank chooses to impose."

"Given the current situation, banks have the power to hold some of their clients Tighter loan conditions have particularly hit highly indebted investors who have taken out interest-only loans (IOs) and are now forced to e refinance repayment of loan principal as well as

Earlier this year, the RBA found that shifting interest to capital and interest would increase payments by about 30 to 40 years. In other words, the cost of transferring a principal and interest loan for a mortgage of $ 400,000 over 30 years with a five-year interest period would be d & # 39; 39, about $ 7,000.

While admitting it would be a -work for the household RBA Deputy Governor Christopher Kent said it was unlikely that this would have a significant impact on the economy, thus reducing 0.2% of total disposable income of households

. "Although listings are drifting faster – stocks are taking longer to sell – new listings are at their lowest level for this time of year since 2013, so there was no change in listings. Mr. Wargent said that it was unlikely that the more stringent conditions would experience a cascade of flaws, especially since the gap between the interests only and principal and interest loans had increased considerably

P & I loans are now reduced by about 1 percent [than IO] so you can both repay the principal – it will be cheaper in the long run term, "he said

" In the end, in this situation, you have the If the market has grown – as was the case in Sydney and Melbourne – everything should be fine.

Avoiding Bank Escape by Chance

Mr. Jovcevski said q "We had to shop UBS investment bank research suggests that it could simply be a temporary option

Jonathan Mott, badyst at UBS Bank , advocated for "parallel" banks, which saw their loans increase The Royal Commission should soon begin to raise rates quickly based on rising funding costs

Mr. Mott told his clients in a recent research note that "regulatory disparity" distorted the crackdown on responsible lending to large banks.

"This seems to push credit down into the shadow of small banks and non-banks," said Mott

. at a time when shado Banks have increased their loans and the big banks have curbed their loans.

For smaller lenders, the impact of higher costs and rapid loan growth was compared to attempting to drink from a chimney.

Mr. Mott stated that the rapid increase in funding costs put significant pressure on smaller, more heavily leveraged lenders, and AMP Bank, Auswide and IMB Bank had already been forced to raise their rates. mortgage.

"We think a lot of other smaller banks will probably need to follow their example or deal with a profitability problem," he said.

Mr. Mott stated that the current regulatory advantage of fictitious lenders was unlikely.

"Although this regulatory and prudential focus on the big banks is justified given their systemic importance, we think it is very difficult to badume that such poor practices are entirely contained in the big banks."

"Once regulators are convinced that the big banks have adequately improved their underwriting standards, we think that their attention will turn to the smaller players."

The reference view of UBS is this bank credibility Its darker scenario, "bearish", is the 3% drop in house prices, which lowers house prices by 20% and bank stock prices tumble 40%

Topics:

the housing industry,

consumer-finance,

banking,

Australia