Lending update – April 2020

The Reserve Bank of Australia (RBA) has provided some support and stimulus to our economy by decreasing their cash rate by 0.25% on the 4^th March and again on the 20^th March, taking the cash rate to 0.25%.

The RBA has also taken extra measures to inject cash into the economy by making funds available for banks to borrow at a rate of  0.25% via bonds.  This money has been earmarked in support of low-cost business banking loans which will start to become available in April.

The lenders have taken a mixed approach in reducing their lending interest rates with some big changes to fixed rate home loans and small business loans.  In the main, lenders chose to only pass on 0.25% of the 0.50% rate reduction to variable home and investment loan rates.

Business loans were a major beneficiary of these rate reductions due to the increased flexibility of the lenders’ credit policy and a broad availability of cheap borrowing arrangements for businesses.

Personal lending

Aside from the changes to interest rates, the lending team are adapting daily to the many changes that have been made by our Government to minimise the financial impact of COVID-19 on both individuals and businesses.

The lenders are also adapting daily, and there have been some considerable support measures adopted by them in support of helping personal borrowers get through these difficult financial times.

If you have been impacted financially by any of the following it may be an appropriate time for you to check in with your broker to see what options may be available:

• • change in employment
  • loss of rent income
  • a material decline in self-employed income
  • any material decline in family income

For more information on mortgage options, please view our online article on the Infocus Advisory website.

Credit changes

The banks are now looking at the valuations of property very closely.  In normal markets, valuations are reliant on previous sales and defined clearance rates to match an appropriate mortgage valuation to a property for a purchase or a refinance.

With the real estate industry managing some significant changes – online auctions, limited access to open homes, withdrawn sales due to market impact – the ability for a valuation firm to value property is an issue.

We will wait to see what impact this has on property prices around the country, however lenders are becoming increasingly cautious on new-to-bank business with low loan-to- value ratios will be the new norm.

The other credit consideration is that we now have a number of industries where employees are being heavily impacted e.g. tourism, travel, retail, hospitality, sport etc, and clients from these sectors will be under extra scrutiny when applying for new loans or refinancing.  Lenders will also take into consideration potential bonus and commission income reductions and the impact on loan servicing ability.

If you would like more information on the current mortgage options, please contact the Infocus Lending Advisory team.

This information and any advice in this website is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. It does not represent legal, property, tax, credit or personal financial advice and should not be relied on as such. You should obtain advice relevant to your circumstances before making decisions in relation to any matters discussed. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. The case studies are hypothetical, for illustration purposes only and are not based on actual returns. You should seek specialist advice from a tax professional to confirm the impact of any advice on your overall personal tax position. Taxation information is based on our interpretation of the relevant laws as applied at the date of this communication. Nothing in this website represents an offer or solicitation in relation to property, securities, investments, financial services or credit in any jurisdiction. While every care has been taken in the preparation of this information, it may not remain current after the date of publication and Infocus Advisory and its related bodies corporate make no representation as to its accuracy or completeness.