A.P.R.A news update…
It has now been confirmed that the government will provide an extra $2.6m over four years to APRA to “exercise new powers” and collect data from non-authorised deposit-taking institutions.
What effect will this have on the consumer?
APRA chairman Wayne Byres quoted. “If there is a systemic risk … APRA would have the capacity to introduce some rules which might help mitigate that.” These exact reforms remain uncertain at this stage, but it would be safe to assume that these changes are going to influence a niche market of consumers currently able to access more ‘out of the ordinary’ lending opportunities.
Why do we believe this could be happening?
With recent changes to ADI regulations, we have seen a shift in non-bank lending policy and rates, changes that could now be vulnerable to a greater risk of becoming irresponsible, given their new-found edge within the market. One to watch out for could be a detrimental increase in rates for investor interest only loans above 90% LVR. Consumers unable to seek out lending opportunities once available to them through the bank have now had to increase their appetite for risk and move across to a non-bank lender in order to continue to grow their portfolios.
What do we think is likely to change?
It is a strong possibility that APRA will cap investor and interest only lending growth to non-banks at the same level as ADIs. At present, growth per lender is capped at 10% and 30% respectively.
In recent surveys, hundreds of brokers were asked whether they’d continue using non-banks if they were regulated in the same way as banks…
The majority of brokers said yes, pointing out other advantages the non-banks have over the majors. As one Sydney broker explained, “They are proactive, adept and keen for business. Their hunger means that they meet the market and fill the niches the major lenders don’t”.
What’s important to remember?
- Although this could at first be seen as another setback for some, it is important to remember and recognise that a build-up of risky lending in any sector could have a far more impacting and negative consequence on our economic prosperity overall.
- Regulators governing the industry are always working to prevent lenders taking control of the market or operating outside the rules designed to protect the consumer.
- It would be safe to assume that interest rates are not going to dramatically change without good reason as Lenders still need to remain competitive and so offering a product that is unaffordable isn’t going to give them the longevity they need to stay in business.
How can we help?
Any questions you may have around lender policy, interest rates or your personal situation, please get in touch; part of our role is to always remain up to date and look for a range of opportunities undiscovered by the everyday consumer in this forever adapting industry.