Welcome to 2019! I hope you had a great time with friends and family over the holiday break. I believe there’s a whole heap of new year resolutions that were made… now they’re probably on their last legs (let’s hope that’s not the case!).
We are back in full swing and looking forward to a cracking 2019. Given the royal commission is wrapping up things from it’s end, the report is due on the 1st of February. There are many anticipating it’s recommendations from what has transpired over the last year. I’ll do my best to keep you in the loop with this.
Business warns of fallout from royal commission lending crunch
Some of Australia’s top business leaders have sounded warnings over the “unintended” fallout from the banking royal commission, including a crunch on lending by nervous banks, which they believe poses the biggest threat to the economy in 2019.
Prominent business figures raised concerns on Thursday about the impact of the “heightened risk alert” that was gripping the banking sector and causing a tightening of new lending to companies and would-be home buyers, driving a downturn across the housing market.
Treasurer Josh Frydenberg this week criticised the banks reluctance to lend to prospective home-buyers, warning it could jeopardise Australia’s economic growth prospects. He said their reluctance was negatively affecting confidence and contributing to the decline in property prices across the country.
Cap On Interest-only Scrapped
APRA will remove its 30% limit on interest-only residential mortgage lending for banks and other lenders from 1 January. This cap was originally put in place in March 2017 in a bid to reinforce sound lending practices and has resulted in a cooling of the interest-only lending market. According to APRA, the introduction of the benchmark has led to a marked reduction in the proportion of new interest-only lending, which is now well below the 30% threshold.
The move opens up opportunity and competition in the lending market for investors in 2019.
Interest-only loans were significantly repriced after the restriction was introduced in 2017, so the decision will likely result in some reduction in rates for interest-only loans – let’s hope this comes to fruition.
What has Dot been up to for the month?
We are in the process of releasing a series of videos that give you a real good insight into the home buying journey. These will be made available on our social media platforms. I trust you will enjoy them as much as I did shooting them!
As always, we hope you enjoyed reading the blog and should you have any questions, please feel free to email Connecting@dotfinancial.com.au or you can call us on 1300 000 DOT (368).