Whats happening in Banking
In 2016, banks and lenders were ordered by APRA, which is the banks governing watch dog, to change lending practices. Banks were not only told how to approve loans but were also given lending caps on volume, number of loans and their profit levels.
The effect has seen banks tightening up and in general terms we are seeing a borrowing reduction of around 30% to what you could have borrowed just a few years ago. This is now being reflected in the fall in property prices because there is less funds available. A result of the Royal Commission has revealed to the public, bad behaviour by the banks, the Commission is, in reality, reinforcing APRA’s compliance to the banks. While good in some areas, it has led to more restrictions on behaviour, lending habits and pricing. There is now no grey and strict policy only in approving loans. The biggest outcome for lending from the Royal Commission is the focus on living expenses. Banks can no longer assume a persons living expenses and to a point, impose a higher cost based on income, where you live, how many in the household and the size of the debt. They then look through your transaction accounts and tally up your habits. Some lenders even request utility statements, and school fees. So while the Royal commission findings are not final, it has forced the banks to over analyse all applications and making the ease of funding even harder than the APRA requirements. Again with less funds readily available, auctions are not clearing and days on market figures are leading to property price discounting. Latest Sydney auction clearance rates 20/21 Oct 2018 under 50%.