Last week I promised you more quotes from APRA that would reveal the continuing bureaucratic bungling in property. Well, we didn’t have to wait long. At a recent finance conference, he lectured mortgage lenders on the growing risks. He failed to say that APRA has created those failed risks.
Club investors know that we set you up so that you only need a few dollars a day to hold quality, new, city properties. You know that Interest Only loans, the tenant, and your tax savings make your loans extremely safe for the banks.
Along comes clumsy APRA, led by Wayne Byres showing that he has no knowledge of this successful form of investing. Why should he? He has a big, fat taxpayer-funded pension to look forward to.
Readers will remember last week, he might have misused his powers based on his lack of knowledge of property investing. He demanded the banks take 50% more money off you by making your loans Principal and Interest. We went through how silly that was. He put further instability into the property investment market by pushing up the rates on Interest Only loans. More money for the big 4! Our Treasurer on the budget night had promised us he would introduce the ACCC watchdog if the banks tried to do this to claw back his bank tax. Rather than do this and represent your interest, what did the Treasurer do? He applauded APRA’s actions.
I wonder if Byres was unsure whether he would grab the headlines. Now he’s questioning whether you were declaring enough living expenses. So he saw another area to attack property investors.
Here are his quotes from the conference and I will let you see the many flaws in his “logic”.
“Too many borrowers had been granted loans in excess of six times of their income, as measured by loan to income (LTI) ratio of greater than six times”.
“As a rule of thumb, LTI of six times would require a borrower to commit 50% of net income to repayments if interest rates returned to their long-term average of a little more than 7%,” he said. I’ve long used that method and I can assure Mr Byres that far from committing 50% of their net income to their property investing loan, it is currently 1% and when we have a peak in rates some years ago, it was 5%. Why is Byres misquoting the facts and attacking property investors?? He now wants his ill-informed LTI to restrict your future safe asset expansion.
His ignorance of property investing market, has been shown by his further comment. “LTI lending in Australia is well north of what is permitted in other jurisdictions, grappling with high house prices and low-interest rates, such as UK and Ireland”. This is because over there their sensible Reserve Bank has had 10 years of sustained low home loans of around 3%. If he looked at the London market, he’ll find there that the LTI is greater than it is in Sydney even. The rest of the UK and Ireland have been benefitted from a much more sensible Reserve Bank there which has seen housing loan rates at 3%.
- Our banks are the most profitable in the world.
- No other major country has more than one bank in the top 10 on the share market.
- Our banking monopoly has 4of the top 5 positions!
- Commonwealth Bank reported 79% of its loans are ahead on average of 29 months! Banks need APRA’s protection??
- 90-day arrears are at a record low, CBA’s is 0.5%, Macquarie is 0.23%.
- Of our top 200 companies dividends on the share market, our big 4 provide a whopping 24%
- Banks return on equity is sitting over 16%
- Cash profits up a massive 18% (that’s your money)
Isn’t APRA supposed to be protecting consumers? RBA? Treasurer, Scott Morrison?Finding it hard to get good low rate funding?
Hurt by Byres LTI, NIS scare campaign?
Send your problem through to us at firstname.lastname@example.org or contact your Property Mentor. We now have over 400 complaints gone through to the Government. There will soon be a Federal election and then your Treasurer will really take an interest in your NIS!
Until next time,
Kevin Young | Club Founder