After years of knee-jerk responses to APRA intervention, it seems the banks are back to playing hard ball for investor business, lowering interest rates on investment based borrowings in the wake of renewed competition in the mortgages market.
Since pre-GFC days, investors have been on a banking sector roller coaster ride. High LVR’s (Loan to Value Ratio), low LVR’s, high interest rates, low interest rates…it’s enough to make your stomach churn. And until now, the banks have held all the power and pulled all the strings.
But are times changing?
The foundations of the Big 4’s foothold on Australia’s financial services sector were somewhat shaken recently however, when specialist lender Bluestone Mortgages Asia Pacific gave the go ahead to US investment firm Cerberus Capital Management to acquire them.
According to a report in The Australian Financial Review, Cerebrus plans to use its acquisition of Bluestone – which has been re-emerging in the local market for the past four years after retreating to lick its post-GFC wounds – as an opportunity to expand its reach across the Asia Pacific market.
And with 96 per cent of the $1.3 billion plus total loans written by Bluestone in that time generated via broker relationships, this new evolution means more options for us – the mortgage broker, to secure better deals for you – the investor.
This isn’t an isolated incident either. Two more non-bank lenders were swallowed up by global private equity firms late last year, only to emerge as bigger market players.
Blackstone became a majority stakeholder in La Trobe Financial in December, after taking an 80% stake in the non-bank lender. That was hot on the heels of Pepper Group giving a unit of KKR Credit Advisors the go-ahead to takeover the company.
Of course, these non-bank lenders are not under the same regulatory thumb of as the banks themselves.
Hence, when their representatives speak eagerly of expanding and evolving their “institutional investment programs and specialist lending offerings,” and “actualising a number of eminent expansion options that meet the demands of emerging sectors,” what they mean is – investors who might be feeling a little hard done by and need another option.
Great news!
Finally! Good news for investors, as these new industry players give you the potential to sensibly and safely construct a property (and loan) portfolio without breaking the piggy bank, or sapping up all the hard earned equity stored in your PPoR.
In some instances you can secure LVR’s of up to 95 per cent at super competitive interest rates, starting at 4.54%.
And the substantial backing these non-bank, tier 2 lenders are receiving from overseas interests could be just the tip of the iceberg, in what is seemingly a vast sea of investor business just waiting to be conquered.
These are interesting times to be alive and in the property investment game! Particularly when you consider these recent changes across the lending landscape align perfectly with cooler conditions across our major property markets.
Suddenly for instance, Sydney isn’t looking quite so hard to tackle for investors, with more favourable credit deals to be done and competition in the lower end of the housing market slowing significantly. According to CoreLogic data, the recorded year to date clearance rate slipped from 77.9 per cent to 64.3 per cent in March for NSW. Vendors are finding sales trickier to come by.
Playing this hand in the property game to cause an investor slowdown was always going to be risky for regulators. But they really did have a lot of official types barking at their heels about it. So…
The good news is, with continued growth anticipated in the future for ‘non-bank’ lenders, due to heavy backing from overseas companies’, it’s clear that the way finance is being done, is changing with the times.
If you want to better understand the more rapid transitions now occurring across the financial services sector and how they impact you as an investor, and importantly, how to work with them in a safe and effective way to build a financial portfolio that goes the distance and grows your investment portfolio in longevity and abundance…you need a god mortgage broker on your side.
It might sound corny. Okay, it really does…but working with me will give you renewed hope that you can use this quieter period in the property markets to get back in the saddle and investing once more, without breaking the bank!
In order to best navigate the choppy and ever changing seas of Australia’s financial sector, it really is in the best interests of investors to qualify and engage someone who’s earned their sea legs and weathered more than a few fiscal storms. Yes, I’m talking about a mortgage broker with experience relevant to your needs.
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).