I did a Mexican wave yesterday and I have to share it with you!
I’m so excited… not only because the RBA dropped the cash rate by 25 basis points yesterday….
and NOT because the major banks, except ANZ and Westpac, towed the line and dropped their interest rates by 25 basis points too….
but because I see signs that the property cycle is turning back in favour for Property Investors.
Let me explain…
We all know that the property market works in cycles, so there are booms and busts, upswings and downswings.
Well, just like the property market, the financial market works in exactly the same way and unless you have been hiding under a rock over the last couple of years, you would know that the financial markets and banks have copped a beating lately.
This has been due to things like APRA changing the rules for lenders a couple years back to make sure they are lending responsibly and then the Royal Commission into banking literally slowed the flow of money and caused lenders to tighten their rules to the point where most investors no longer qualified for a loan or (in other words) had hit the proverbial financial brick wall.
APRA’s hidden agenda to making the changes was to slow down the heated markets of Sydney and Melbourne however their sweeping changes impacted the whole country.
The banking Royal Commission ensuring that banks were more ethical, responsible and above board with their lending practices, led to the banks ‘overreacting’ and ‘over correcting’ which meant that one day you had borrowing capacity, and then the next day you did not.
The reason so many investors hit the financial brick wall is because the new rules of lending meant when you applied for a loan, that banks were stress-testing ALL your debt at an interest rate of up to 7.5%.
It’s been years since interest rates were at that level so stress-testing all debt at unrealistic interest rates has resulted in many investors being stuck and leaving the property market.
Plus we have experienced the biggest property market correction since the early 1980’s.
This is where the cycle is turning in favour of investors…
The very exciting news for ALL investors is that APRA has decided to remove this ridiculous rule of stress-testing all debt of rates up to 7.5%.
Instead they have told banks to now stress-test ALL debt at the base interest rate plus 2.5%.
This is where I get excited.
For example… if the lenders ‘base rate’ is 3.5% plus the mandatory APRA 2.5%, ALL debt will now be stress-tested at 6% for borrowers instead of the 7.5%.
This means that investors who may have hit the financial brick wall previously, maybe able to now service for a new loan – or a new property purchase or now be able to refinance.
What will happen next?
The next property upswing is coming!
So if you feel you have been stopped by the “financial brick wall” and want to know if you now service with the lenders and want to get into the property market while property prices are low…
Then click here and I’ll get my personal broker to give you a call and provide you with an update of your borrowing capacity.
Even if you have your own broker, it won’t hurt to get a second opinion.
Until next time, happy investing!