It’s been an eventful month for mortgagees as the government and regulators alike announce new rules that affect financing and interest rates.

The Reserve Bank met in the first week of the month and the Board decided to leave the cash rate unchanged at 1.50 per cent.

In this month’s newsletter, we look at how banks have responded to APRA’s call to tighten lending on interest-only and investment loans. We’ll also look at how the new ATO rules for reporting tax defaulters from July 1 2017 impacts you.

If you want to take advantage of existing low rates before they hike up again, it’s now time to give me a call.

I can lay all your options out on the table so you can make the most informed decision for your unique circumstances.

Call me now on: 0402 408944

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 APRA moves to cool market – Banks respond.

Prepare yourself for higher home loan interest rates.  

In a move likely to further push up mortgage costs, the Australian Prudential Regulation Authority (APRA) has asked all banks to tighten their lending practices on interest-only and investor loans.    

It has also further insisted the banks hold bigger reserves in case the housing market turns ugly. The move follows a warning by Treasurer Scott Morrison that regulators needed to crack down harder on high-risk loans, particularly to real estate investors.

How have the banks responded?

The new rules require banks to limit the flow of new interest-only lending to 30 per cent of total new residential mortgage lending. Currently all four major banks are well over this quota. CBA and Westpac have the highest proportion of interest-only loans, at around 40 per cent, according to analysts. NAB and ANZ are slightly smaller at 38 and 37 per cent.

In response to APRA, many banks have already increased rates to interest only loans, with others sure to follow. For instance, last week AMP revealed all new business for owner occupiers signing up to interest-only variable rates would rise by 28 basis points. Fixed rates were also hit, with new customers for owner occupier and investment interest only deals seeing their rates climb by 20 basis points.

That means owner occupiers on a variable rate loan for interest-only saw a rise from 4.19 per cent, to 4.47 per cent on loans between $250,000 and $750,000.

AMP’s move follows in the footsteps of National Australia Bank’s decision to increase interest rates on interest-only loans while Commonwealth Bank reopened the door to investment refinancing after a three-month hiatus.

Other lenders are dumping interest-only loans altogether – including Citi who last month banned owner occupier interest-only loans and ME who will only allow this type of loan if the customer has a loan-to-value ratio not greater than 90 per cent.

One thing’s for certain – borrowers looking to buy a house with an interest-only loan will find it much harder under the new APRA rules.

Want to find out what the new, harsher rules on lending mean for your mortgage? Call me now to talk through all the fine details and find a solution that works for you.

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Don't forget to pay the ATO – or risk a credit black mark.

With tax time looming, there’s change afoot to hit businesses who haven’t effectively engaged with the ATO to manage their tax debt where it hurts – their credit rating.    

The Federal Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) announced that from 1 July 2017 the Australian Taxation Office (ATO) can – for the first time – disclose to Credit Reporting Bureaus business’ who don’t take their tax debt seriously.

That means tax defaults can now be recorded on a taxpayer’s commercial credit file, with immediate and lasting consequences. A credit default lasts for five years, and can result in financiers withdrawing support and suppliers stopping credit, so some businesses will find it difficult to trade.

It will also have potential ramifications for business owners looking to get a mortgage, who may find it even harder to secure financing due to a black mark on their credit rating.

The measure will initially only apply to businesses with an ABN and tax debt of more than $10,000 more than 90 days overdue.

If you’re shopping for mortgages and own your own business, come in before June 30 to discuss whether the latest ATO changes can affect your borrowing power. Call today.

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