Borrowing to be easier as lenders ‘aid’ investors in 2019: economist
After the removal of certain lending restrictions and the conclusion of the banking royal commission, many experts believe that borrowing will become relatively easier for investors in 2019. How will lenders start to ‘aid’ home buyers this new year?
The past years saw the tightening of the credit environment as regulatory bodies sought to regain the balance in the property market through interventions, among which are the interest-only lending cap and the amendment of serviceability assessment to include greater scrutiny on the borrower’s living expenses.
Adding to the pressure on the lending landscape was the banking royal commission, which resulted to more conservative lending practices across the board.
By the end of 2018, the lending cap was removed and the banking royal commission has concluded, giving investors more options for expanding their portfolio in the future.
Even though the strict serviceability assessment remains, experts believe that lenders will start to pull back and ultimately make the process easier for borrowers this year.
According to Federal Treasury’s former economist Redom Syed: “Some of the questions they asked was just getting a little bit too far. If you were seeking a loan, you would have felt it at one point of last year, when they were asking you about your Netflix subscription or something ridiculous like that.”
“I think that's going to be pulled back a little bit, more common sense is going to be applied.”
“If I have to describe January as a finance broker, that’s probably already happened a little bit. We’re starting to see lenders be faster and be less uncertain about things and just apply common sense.”
After they have lost a bit of the market due to greater scrutiny on living expenses, particularly by the end of last year, Mr Syed believes that lenders will be keen to regain consumer confidence in 2019.
“Now, I think January probably see signals that they’re just getting more reasonable and trying to do things quicker, which will help the market,” Mr Syed highlighted.
With consumer confidence back as transactions become easier, investment activity is also expected to improve throughout the year, ultimately making way for the recovery of the property markets currently facing the challenges of softening conditions.
In fact, Mr Syed believes that, for the first time in several years, lenders will be ‘aiding investors rather than hurting investors’.
In the absence of any major changes after the federal elections, it could be a good year for property investors seeking to grow their portfolio, according to him.
“It’s been four or five years of constant changes, of tinkering that all really hurt investors. 2019 might be the first year where that changes.”
“It’s a very positive outlook for the rest of the year and coming from a position of strength,” the economist said.
Moving forward, Mr Syed encourages investors to stay vigilant about their finances as the lending environment remains in the process of easing up.
“Be prepared and know your debt arrangements, know where you stand with your borrowing capacity relative to current lending conditions,” he concluded.
Tune in to Redom Syed's episode on The Smart Property Investment Show to find out what investors can expect from the finance sector in 2019.
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