FIRST-HOME BUYERS NOW BEING HIT BY CREDIT SQUEEZE
27 May 2016, Written by Nick Nichols
TOUGHER bank lending rules for investors could be closing more first home buyers out of the property market, according to Mortgage Choice.
The lending broker has revealed that investors, in particular, are struggling with the new rules introduced by the banking industry at the end of 2014 to de-risk its exposure to a possible property bubble.
Mortgage Choice says the effects of the credit squeeze are only now starting to be felt to any great extent, and first-home buyers are the frontline casualties.
Mortgage Choice's annual investor survey has revealed 33 per cent of property investors have changed their investment plans as a result of the tougher lending criteria.
The results from WA is even more pronounced with 40.6 per cent of respondents saying they had to reconsider buying a property, followed closely by 36 per cent in NSW.
The tighter lending rules include lower loan-to-valuation ratios as well as stricter serviceability requirements. Banks have also revealed that they are independently blacklisting some suburbs and even individual developments across Australia depending on their risk profile.
The crackdown is reflected in Australian Bureau of Statistics figures which show the monthly value of investment loans has slumped about 10 per cent since December 2014.
"It would now appear as though this spate of changes are being felt by existing and potential investors, with many Australians actually deciding to put their property plans on the backburner," says Mortgage Choice CEO John Flavell.
"For those who haven't shelved their investment plans and have actually purchased an investment property over the last 12 months, data from the survey found 32 per cent of respondents described the process of obtaining finance as difficult."
Flavell says almost 50 per cent of the investors who described the finance process as difficult were first-home buyers.
"Over the last 12 months, 36.1 per cent of Mortgage Choice's investors have been first time buyers," he says.
"These investors are young, they don't have huge deposits or massive incomes and they realise that purchasing an investment property is the only conceivable way to get a foot onto the property ladder.
"Unfortunately, the harsh reality is these buyers are more susceptible to interest rate increases and changes in lending policy than others.
"So while the recent price and policy changes have clearly reduced the overall level of investment lending, it would appear a lot of the impacted investors are first time buyers those struggling to get a start.
"If this continues, I believe the gap between the 'property haves' and the 'property have-nots' will widen especially if property values in markets like Sydney and Melbourne remain strong."
Author: Nick Nichols