Underwriting rules tightened due to housing bubble fears… Investors still recovering from financial crisis… Franchise CEO says average loan size compared to salary 'worrying'
Bubble fears prompt change in underwriting rules
Australia’s major banks have tightened underwriting rules for property investors amid growing fears of a housing bubble, after the Australian Prudential Regulatory Authority warned that Sydney's housing bubble could destabilise the financial system, according to NuWire Investor.
Paying heed to the warning, three out of Australia’s four major banks have raised the minimum down payment to 20 per cent of the purchase price, having previously required only five per cent. CBA have told MPA they continue to lend to 95%.
Stricter mortgage approval criteria have been introduced, and the banks are either not providing interest rate discounts on mortgages to property investors, or discouraging discounts.
Treasury secretary John Fraser warned last month that Sydney is "unequivocally" in a housing bubble, due to interest rates at historically low levels. "When you look at the housing price bubble evidence, it's unequivocally the case in Sydney. Unequivocally," he said.
Investors still recovering from financial crisis
According to an article in the Herald Sun, it’s been seven years since the global financial crisis but have Australian investors recovered from the shock?
Don’t bet on it, says Belinda Allen, economic and market research senior analyst at the Commonwealth Bank’s wealth management arm, Colonial First State. “We all assume the appetite for equities will go back to normal but I think the question is what is normal?” Allen says.
Among such clients’ portfolios, exposure to equities had fallen from 60 per cent to almost 40 per cent. Allen says appetite for risk “has permanently changed”, albeit in the context that people tend to have bigger mortgages and more savings. “It’s about finding a new balance.”
Figures released by Colonial last month show that among many investors, particularly men aged 50 to 59, there has been a pronounced shift from shares to property — especially in Melbourne and Sydney.
Franchise CEO says average loan size compared to salary 'worrying'
The average home loan has grown almost four times faster than the average Australian full-time wage, new research has revealed.
According to data from the Australian Bureau of Statistics, the average home loan grew by 18.5 per cent in the two years to April 2015 – from $301,800 to $357,500. During the same time, however, the average Australian full-time wage grew just 3.6 per cent from $77,225 to $80,054. Speaking about the data, Mortgage Choice chief executive officer John Flavell says the statistics are “worrying”.
“Data from the Australian Bureau of Statistics shows the current average loan size in Australia is approximately 4.5 times larger than the average wage. By comparison, in 2013 the average loan size was just 3.9 times the average full-time Australian wage,” he said.
Australia’s major banks have tightened underwriting rules for property investors amid growing fears of a housing bubble, after the Australian Prudential Regulatory Authority warned that Sydney's housing bubble could destabilise the financial system, according to NuWire Investor.
Paying heed to the warning, three out of Australia’s four major banks have raised the minimum down payment to 20 per cent of the purchase price, having previously required only five per cent. CBA have told MPA they continue to lend to 95%.
Stricter mortgage approval criteria have been introduced, and the banks are either not providing interest rate discounts on mortgages to property investors, or discouraging discounts.
Treasury secretary John Fraser warned last month that Sydney is "unequivocally" in a housing bubble, due to interest rates at historically low levels. "When you look at the housing price bubble evidence, it's unequivocally the case in Sydney. Unequivocally," he said.
Investors still recovering from financial crisis
According to an article in the Herald Sun, it’s been seven years since the global financial crisis but have Australian investors recovered from the shock?
Don’t bet on it, says Belinda Allen, economic and market research senior analyst at the Commonwealth Bank’s wealth management arm, Colonial First State. “We all assume the appetite for equities will go back to normal but I think the question is what is normal?” Allen says.
Among such clients’ portfolios, exposure to equities had fallen from 60 per cent to almost 40 per cent. Allen says appetite for risk “has permanently changed”, albeit in the context that people tend to have bigger mortgages and more savings. “It’s about finding a new balance.”
Figures released by Colonial last month show that among many investors, particularly men aged 50 to 59, there has been a pronounced shift from shares to property — especially in Melbourne and Sydney.
Franchise CEO says average loan size compared to salary 'worrying'
The average home loan has grown almost four times faster than the average Australian full-time wage, new research has revealed.
According to data from the Australian Bureau of Statistics, the average home loan grew by 18.5 per cent in the two years to April 2015 – from $301,800 to $357,500. During the same time, however, the average Australian full-time wage grew just 3.6 per cent from $77,225 to $80,054. Speaking about the data, Mortgage Choice chief executive officer John Flavell says the statistics are “worrying”.
“Data from the Australian Bureau of Statistics shows the current average loan size in Australia is approximately 4.5 times larger than the average wage. By comparison, in 2013 the average loan size was just 3.9 times the average full-time Australian wage,” he said.
