Haven Accountants and Financial Advisers

Home Blog What are the latest lending changes?
What are the latest lending changes?

 

What are the latest lending changes?

The world of lending has had a bit of a shakeup over the past year or so, and it can be difficult to keep up with everything. We’ve broken down the main changes to help you understand what they are, and what they might mean for you.

Higher interest rates

Rising interest rates is a topic on every homeowner or potential homeowner’s mind at the moment. At the beginning of last year, the average two-year mortgage rate for new borrowers was 3.49%, with some bank specials going as low as 2.19%, and by November, that number had risen to 4.65% – the fastest increase in 15 years.

With around 60-70% of all fixed rate mortgages coming up for review this year, most households will soon be facing the full effects of this rate hike.

But should you fix in for certainty, or float your mortgage for a stronger focus on occasional loan reductions? If you fix, how long should you fix for? It’s difficult to predict exactly how much higher interest rates will go, so it’s important to know your options if you are looking to refix or refinance this year. Make sure you speak to the professionals to get the best advice for your situation.

Tighter LVR restrictions for homeowners

Designed to reduce the number of highly leveraged borrowers and build resilience in the financial system, the Reserve Bank recently instructed the banks to limit lending to those with less than a 20% deposit.

Of course, this change makes it much harder for first home buyers with lower deposits to get onto the property ladder, but is said to improve affordability for first home buyers by reducing house price inflation.

Removal of interest deductibility for investors

Along with extending the bright-line test to ten years, the Government has also removed interest deductibility for property investors.

This means that investors are no longer able to offset interest payments against their tax bill – a big change that has strongly affected the investor market.

CCCFA lending rules

And finally, on top of all of this, perhaps the biggest change affecting the mortgage lending market is the recently amended Credit Contracts and Consumer Finance Act (CCCFA).

This has meant that banks are taking an ultra-conservative approach to lending, going so far as to scrutinise everyday expenses such as Netflix subscriptions, coffee spending and takeaways, to name just a few areas of focus.

Although it was designed as a way to protect vulnerable borrowers from unscrupulous ‘predatory lenders’, it’s had some very real consequences in terms of affecting most households’ borrowing power, right across the country.

If you’re looking to buy your first home, upgrade to another, or are perhaps considering an investment property, no doubt this change will have an effect on any lending required.

 

For in-depth advice and recommendations for your situation and how to get lending sorted amongst all of this industry change, come and chat to the team at Haven.

We’re experts in knowing just what is needed to get your circumstances understood and we can advocate for you, maximising your chances of getting your plans and goals across the line this year.

 

Contact us to get started

Get in touch with us!