Some borrowers will soon find it harder to get a mortgage after the banking regulator announced tougher serviceability tests for home loans. So who will they impact most?

The Australian Prudential Regulation Authority (APRA) will increase the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications from 2.5% to 3% from the end of October.

This means that banks will have to test whether new borrowers would still be able to afford their mortgage repayments if home loan interest rates rose to be 3% above their current rate.

APRA estimates the 50 basis points increase in the buffer will reduce maximum borrowing capacity for the typical borrower by around 5%.

“The buffer provides an important contingency for rises in interest rates over the life of the loan, as well as for any unforeseen changes in a borrower’s income or expenses,” APRA Chair Wayne Byres wrote in a letter to the banks.

Why is APRA increasing the buffer?

This move doesn’t come out of the blue. Federal treasurer Josh Frydenberg flagged tougher lending standards a week prior following a meeting with the Council of Financial Regulators.

And it’s due to a combination of factors.

Firstly, interest rates are at record-low levels, and secondly, the cost of the typical Australian home has increased more than 18% over the past year – the fastest annual pace of growth since the late 1980s.

That combination has made financial regulators a little worried that some homebuyers are starting to stretch themselves too thin and borrow more debt than they can safely afford.

Mr Byres adds that 22% of loans approved in the June quarter were more than six times the borrowers’ annual income. That’s up from 16% a year prior.

As such, APRA did consider limiting high debt-to-income borrowing but believed it would be more operationally complex to deploy consistently.

“And it may lead to higher interest rates for some borrowers as lenders effectively seek to ration credit to this cohort,” APRA adds, but it doesn’t rule out limiting high debt-to-income borrowing in the future.

Which borrowers are most likely to be impacted?

The increase in the interest rate buffer will apply to all new borrowers.

However, the impact is likely to be greater for investors than owner-occupiers, according to APRA.

“This is because, on average, investors tend to borrow at higher levels of leverage and may have other existing debts (to which the buffer would also be applied),” APRA adds.

“On the other hand, first home buyers tend to be under-represented as a share of borrowers borrowing a high multiple of their income as they tend to be more constrained by the size of their deposit.”

What could this mean for your home loan borrowing hopes?

If you’re worried about how this latest announcement from APRA could impact your upcoming application for a home loan, then get in touch today.

We can apply APRA’s new loan serviceability tests to your personal circumstances to help you determine your borrowing capacity and focus your house hunting.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

The federal treasurer has given the strongest indication yet that a home loan crackdown is coming, stating that “carefully targeted and timely adjustments” may be necessary to avoid troubled waters. So what could a potential lending crackdown look like?

Lending standards and fast-rising property prices have been hot topics of late.

Interest rates are at record-low levels, and the typical Australian home has seen its value increase more than 18% over the past year – the fastest annual pace of growth since the late 1980s.

It’s a recipe that’s making financial regulators a touch worried that some homebuyers are starting to stretch themselves too thin and borrow more debt than they can safely afford.

So federal treasurer Josh Frydenberg recently met with the Council of Financial Regulators – which includes APRA, ASIC, the Australian Treasury and the RBA – to discuss the state of the housing market.

“We must be mindful of the balance between credit and income growth to prevent the build-up of future risks in the financial system,” Mr Frydenberg said in a statement.

“Carefully targeted and timely adjustments are sometimes necessary. There are a range of tools available to APRA to deliver this outcome.”

What could this possible crackdown look like?

Here’s an interesting stat for you: almost 22% of Australians have a mortgage debt that’s more than six times higher than their annual income, according to the latest data from APRA.

That’s up from 16% just one year ago.

The fact APRA mentions that particular stat gives us a pretty good clue as to what one possible lending crackdown measure could be.

“Most analysts expect that this time, APRA will target debt-to-income ratios, probably by limiting the proportion of loans that can be made above six times an applicant’s household income,” explains the ABC.

It’s also worth noting that Mr Frydenberg and APRA are not the only ones to publicly indicate that change could be on the horizon – the RBA expressed similar concerns about the increase in housing prices and housing debt just days ago, too.

“Even though the banks have strong balance sheets and lending standards are being maintained, there is a risk that in this environment, households will become increasingly indebted,” RBA assistant governor Michele Bullock wrote.

“A high level of debt could pose risks to the economy in the event of a shock to household incomes or a sharp decline in housing prices. Whether or not there is need to consider macro-prudential tools to address these risks is something we are continually assessing.”

Want to know how a potential lending crackdown might affect you?

It’s worth reiterating that we still have very limited information available about what financial regulators have in mind for any potential lending crackdowns.

What we can do, however, is help you assess your potential debt-to-income ratio on any property purchase you currently have in mind. And we can also help you determine your borrowing capacity in the current lending landscape.

So if you’d like to find out more, get in touch today. We’d be more than happy to run you through it all in more detail according to your personal circumstances.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Reduce Energy Bill Cost

Energy gets expensive

The energy bill forms the largest part of most household budget's. #energy #Energybill #Budget #Householdbudget       #savings
Here are a few pointers on how you can manage it better.

To buy or to rent - That is the Question.

This is a question that people always ask. It is similar to the egg or chicken - What came first? #buy #rent #homeowner #homeloan #firsthomebuyer#newhome

Renting might seem more appealing with soaring housing prices in Sydney and Melbourne but don't expect it to be cheaper than buying. 
While investors have boosted the supply of rental accommodation and reduced the rate of growth of rents, rents are still growing in the two major cities, Housing Industry Association senior economist, Shane Garrett said.
Real Estate Institute of NSW president Malcolm Gunning said in many cases, "mortgage repayments are cheaper than rental".
"Take for example a one-bedroom in inner city Sydney which costs about $700,000. At about a 4 per cent fixed mortgage rate, you pay about $580 a week," he said. But rents in these areas are about $650 to $700.

Proud to be a Winning Team again!

Last evening I was the proud recipient of the MFAA 2018 Residential Mortgage Broker Award for NSW and ACT. This award comes after being a State finalist in 2016 and 2017.

A decade of hard work in a male dominated industry, has started paying off.#MFAA2018 #MFAAStateWinner #mortgageBroker #hardwork #success#winning #achievement #Womeninbusiness #womeninfinance #MFAA #FAST#NAB #ANZ #CBA #Westpac

Raising three amazing daughters while kicking off my Mortgage Broker business was tiring but immensely satisfying. I have dreamed of making a difference to all new migrants as I have experienced the difficulties of being a migrant myself. Through my various interests at the Ramakrishna Mission or by sponsoring debating contest at school, I am giving back to the community for a better future.

Role of the Financial Advisor is changing

Changing Roles of a Financial Planner
You can plan your finances using an App these days.
Although technology has eroded some of the reasons for people to seek the help of a financial advisor, it has also created new opportunities for advisors to reach more people. #financialplanner #homeloan #wealthcreation #finance#financialadvisor

Many firms have embraced technology to a degree but have failed to see any
significant rewards. For financial advisors to get the most from their online profile, social media and technology as a whole they need to focus on:
1. Having a predefined ideal client type: Create your online profile and message to appeal to these personas.
2. Focus on providing value in exchange for basic contact information: Such as downloadable guides, webinars, videos, free online consultations. Use social media to share and promote.
3. Develop a re-marketing process: It is vital to continually engage with your contacts that are generated through your offerings, remind them of your firm and the benefits you have to offer them.

Tips to save money on your Energy Bill

Have you been considering a way to improve your home, get more money in your wallet, and have something to show off to your judgmental neighbors? You might want to think about investing in solar panels for your house. #renovation#investment #solar #Energybill #energy
Below are just four advantages of having solar panels installed in your home.

1. Reduced Electricity Bill
Installing solar power in your home gives you the freedom to look forward to receiving your next electricity bill, as you know it’s going to look much better than before the solar panels existed. Solar power cuts down your electricity usage significantly. If you’re on a budget, start with one and see what difference it makes.
2. Government Pay Back
State governments offer rebates and other financial incentives to those who install solar panels. Just make sure you do a quick search of local legislation as these pay backs change often.
3. Increase the Value of Your Home
Additions like solar panels can really increase your home’s value. You may not be planning to sell anytime soon, but just listing solar panels as a feature can boost your home as an asset, making it even more valuable in the immediate and longer term.
4. Love Your Environment
One significant advantage to the installation of solar panels in your home is the environmental benefit they bring.
Contact Madhu on 0425 341 086 for more saving tips and smart investments

Personal information is currency in the underground world of cybercrime

Our digital devices hold much of our personal data, serving as one of our most valuable assets. Over the years, many of us have formed bad habits that could enable criminals to easily hack into our personal and financial information. #Password #onlinerisk #CyberCrime#OnlineDanger #internet

Here are five online habits that put you at risk of identity theft, plus tips on how to can prevent this from happening.
1. RISK: Using the same password for multiple accounts
First things first: if you’re using the same old password for all your accounts – this needs to change!
– Make passwords hard-to-guess
– Password managers

Like us on Facebook for all the latest posts.

Retaining clients - Keep your customers away from your rivals 

#Winning #success #inspiration #competition

Customer is king - We often hear this. But how do you retain customers?

Here are our tips:

1. Make sure you have the right number of people on your team dedicated to
customer support. Figure out how many support members you need to be able to respond to your average number of incoming messages per hour.
2. If you don’t have the resources to respond to most of your customer service
messages in an hour, tell them what time frame they will hear
from you.
3. Set up your workflows so you have easy tools to speed up the response
process. We recommend a tool for assigning emails to different members of
your team, and an integration that lets you see the context on a customer’s
order history without having to log into a different service.
4. Pick an email and social media management product that’s fast enough.
You want one with keyboard shortcuts and no page load. If your customer
service team is using it 8 hours a day,
5. Consider speed over perfection. It might be a nice touch to add emojis or
personalization, but if you have to choose between that and a rapid
response, go with the latter.

I personally use these ideas at my workplace. Tell me your ideas to improve performance at 0425 341 086 or by email at loans@financeandmortgage.com.au.

Findings From The Mosaic Project – Laura VanderKam

We often say “But I don’t have time”, but research shows that successful women are doing it daily. Women earning six figures, with families and kids, work 44 hours on average and still find time to sleep around 54 hours a week. #Women #WomenPower #Success #Winning#MosaicProject #CareerWomen #TimeManagement

Here are 10 Tips from the project
1. Keep A Time Log – Be accountable for the time you spend on each task
2. Move Work Around – Work shifts, part time or flexibly
3. Look Forward – Create a list of dreams - if we know where we’re going ,it’s easier to get there.
4. Be Strategically seen - Invest time in relationships at work. When you’re at conferences, make sure you connect with people there.
5. Build In Space – Don’t overbook your day with appointments, ensure that you have time to listen to a client or to share a cup of coffee with a colleague.
6. Be There At Home - Home life deserves the same mindfulness as your working life. Go for a family walk, try a new recipe or read books from the library.
7. Let It Go - Housework, errands, packing lunches. A sauce from a bottle saves precious time that you can spend with your family.
8. Get As Much Help As You Need - You are better off getting the help you need and being more relaxed at work and at home.
9. Nurture Yourself - In The Mosaic Project, the women slept about eight hours a day. Also, people exercised about 3.3. hours a week. Self care such as sleep and exercise is what enables women to have their busy lives. It gives you the energy to be focused and productive.
10. Look At The Whole Mosaic - There will be good moments and bad moments. There can be stressful days in the middle of a very good life, try to do better the next day. If you look at the big picture, you will see a lot more joy in your life.