On budget day, a decision was taken that may affect the Australian economy more than anything announced by Scott Morrison.
On Tuesday, the Reserve Bank (RBA) dropped its cash rate by 25 basis points to an all-time low of 1.75 per cent.
In its statement, the RBA said that the government’s increased intervention in bank lending was having such an impact on the housing market that it gave the RBA scope to reduce rates. It said “In reaching today’s decision, the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate.”
The C&N Finance Team’s conversations with banks show that the supervision from the Australian Prudential Regulation Authority (APRA) is very detailed and that APRA is really looking under the bonnet of every bank to make sure that things are ticking over nicely. (Or as nicely as any government regulator can be!).
As APRA gets more detailed in it analysis of bank lending and its risk profiles. We are likely to see:
• Banks specialising in niche sectors
• Tougher lending for borrowers with multiple investment properties
• A further spread of interest rates between ‘safe’ and ‘risky’ lending
What is clear is that just going down to your local branch to arrange finance is no longer going to cut the mustard. What borrowers need is someone who understands the different banks’ appetites for lending.
A one-size-fits-all approach to lending no longer applies.
Disclaimer: This article contains general information; before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs. Click for more detail regarding this disclaimer.