You’ve probably heard that the Australian Banking Royal Commission has concluded, and the final report has been issued.
It’s the talk of the country right now.
Well, the good news for property owners is that there will be no drastic changes in relation to lending via banks and financial institutions to investors and the general public. This is excellent news for the market and essentially means that it’s back to business as usual for the real estate and property sectors!
I’m sure that we’re all glad to hear that.
What about APRA?
Only recently, ARRA announced that the limits on Interest-Only Loans will be lifted. It’s unclear if they will change this stance at this point – so watch this space.
For more information, read our latest blog, Changes to Lending Restrictions: APRA Lifts Interest-Only Loan limits.
5 Royal Commission takeaways you need to know
We get that you’re probably far too busy to read all three volumes of the Commission report.
So, our newly appointed in-house Finance Specialist, Damian Wallace, has done it for you!
Here are his five summarised points:
- Now that the Commissioner has released his recommendations, the level of certainty will increase across those providing credit approvals – which is a good thing. There have been some extremely conservative lending policy restrictions preventing people from borrowing, and this certainty may help alleviate some of this.
- Regulatory bodies, APRA and ASIC have been granted increased powers, as well as higher level of expectations to ensure banks are continuing to comply with their responsible lending obligations. There will be no changes to the laws, and banks must continue to comply – as such, credit applications will continue to be appropriately scrutinised.
- The Commissioner is calling for all Mortgage Brokers to act in the clients’ best interest. This is great news and will ensure all broker are consistently working in this manner. Most already do this, which is why 6 out of 10 Aussies (and growing) choose a broker over a bank to secure a loan.
- One of the negatives is the removal of Mortgage Brokers’ Trail Commissions from 1 July 2020, and a further review of commissions in the following years. Instead, The Commissioner has recommended a flat-fee model and a consumer-pay model to be introduced, which is a significant concern to consumers, given its potential to both effectively wipe out competition and result in higher interest rates for every day Australians.
- The Federal Government has already voiced their concern over this consumer-pay model due to the potential flow-on effect. We will need to wait and watch carefully which government (Labor or Liberal) is able to achieve legislative changes, and monitor their intended and unintended consequence on lending, and in turn, on the Northern Beaches real estate market.
Final thoughts: Damian Wallace
All in all, I do not expect to see any significant changes to lending, particularly over the next 18 months, but I do believe there are some perceivable possibilities of lending policy relaxation which could increase access to lending. However, this is no silver bullet for ‘easier’ lending.
The banks are on notice to comply with the law or face further penalties, and the industry will have an ongoing focus on more responsible lending.
Competition is absolutely critical now and into the future, and the mortgage broking industry is a key driver of this.