Lending restrictions could soon ease

Financing options for homebuyers could open up once more with the federal government suggesting that lending restrictions could be eased if property prices fall sharper than expected.

Federal Treasurer Scott Morrison says the government is closely monitoring the slowing housing market and that stricter house lending rules imposed on banks are “completely malleable”.

“The great thing about these macroprudential controls, as opposed to a structural change to your tax system, is that they are completely malleable,” Morrison told the AFR.

“You can target them, you can fine (tune) – you can pull them back, you can push them forward, you can watch them all the time.”

Hang on, why did he say that?

Well, tougher lending conditions are being blamed for declining housing prices in residential hotspots across Australia.

You might recall that last year prudential regulator APRA warned people to prepare for a crackdown on lending standards.

APRA’s main concern was that banks and other lenders are underestimating their borrowers’ living expenses when loans are applied for.

They also capped the amount of new loans that could be interest-only at 30% and introduced a 10% annual growth cap on investor loans.

And it might have been a little too successful

According to CoreLogic, Sydney house prices have declined by 3.1% since peaking mid last year. Melbourne property prices meanwhile are at a standstill.

Morrison says he regularly meets with the heads of APRA, the RBA and ASIC to discuss market conditions.

And sure to be on the agenda for the next meeting will be whether or not to wind back the lending restrictions – upcoming market results pending, of course.

What we think about it all

While we pride ourselves on helping you navigate the pitfalls of securing finance in all lending climates, it never hurts to have more options up your sleeve, so we welcome the latest comments from the treasurer.

That all said, the market is ripe for first home buyers right now, as highlighted in a recent survey by NAB, so if you’d like to take advantage of the favourable conditions, get in touch with us today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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