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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.


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BFCSA: Interest rate hikes by Banks ‘threaten financial system’

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Interest rate hikes ‘threaten financial system’

The Australian 12:00am March 27, 2017

Michael Roddan


Rising interest rates for property investors are increasingly posing a threat to the stability of the financial system, according to a growing number of economists and analysts, but the chief executive of the Property Council of Australia Ken Morrison says there’s nothing to worry about just yet.

Commonwealth Bank was among nine of the nation’s banks to hit investors with surprise interest rate hikes on Friday, after National Australia Bank sparked an industry-wide repricing last week that has seen the nation’s largest lenders, including ANZ and Westpac, charge between 23 and 28 basis points extra for a number of investment loans.

The hikes were made independently of any move in the Reserve bank’s official interest rate.

But as rampant investor lending continues to come under closer scrutiny, a confluence of potential policy changes and market dynamics is threatening to derail the stability of the housing market.

Analysts argue rate hikes are piling more risk on to a system already stressed by possible changes to capital gains tax in the federal budget, the apartment “settlement bulge” in capital cities, low rental yields and toppy house prices.

As interest rates rise and house prices begin to cool, investors may no longer find economic sense in owning a property if costs are increasing at a time when the outlook for capital growth — the continued increase in prices — is flat.

“There is clear evidence that the macro conditions for Australian house prices are deteriorating,” said CLSA analyst Brian Johnson.

“This change in sentiment is particularly worrisome, given the extent of Australian housing investors who are willing to tolerate a substantial post-tax negative carry on home loans in anticipation of a future gain,” he said. “The expectation that house prices are no longer rising in itself could trigger correlated selling from this negative cash flow cohort.” Despite investor rate hikes and tightening of lending criteria, the property market is still running hot. Sydney’s auction clearance rate rose to 81.1 per cent in the week to Saturday — the highest this year.

Mr Morrison, the national representative for the property industry, said the prudential regulator was doing its job and the banks were “in a good place”.

“Interest rates obviously have a big impact on property prices,” he told The Australian.

“While there is some upwards pressure on rates I don’t think we’re likely to see aggressive rate hikes through the year, so the likelihood of big shifts in interest rates that have an impact on property prices is small.

“Obviously if there was a big shift then it would have a significant impact. APRA have done an enormous amount of work with the banks to ensure their books are in good shape. It’d be wrong to overstate the risks in the banking sector or overstate the likelihood of big swings in macroeconomic variables,” he said.

Lenders have pointed to rising regulatory costs and increased funding costs to justify hike rates.

But it appears these pressures will only worsen as US interest rates continue to rise and APRA forces the banks to hold more capital to help them withstand economic shocks.

Mr Johnson said the big four banks were about $20 billion short of Tier 1 capital, and if APRA brought its regime into line with international recommendations to increase the risk weight for investor loans it will add another $2.6bn for each 10 per cent increase in weighting.

Meanwhile, with the sharp focus on mortgage rates from politicians and the media, Mr Johnson said investor home loans were “the only major lending product where the Australian banks still apparently have pricing power”.

AMP Capital chief economist Shane Oliver said he didn’t expect the banks to hike investor rates much, but such a move could prompt investors to dump properties on to the market.

“Rental yields have collapsed and so investors are very dependent on capital growth. If interest rates start rising it’ll start to have a dampening impact on capital growth,” Mr Oliver said.

He said as extra housing supply hit the market it would push prices down. More than 160,000 apartments are expected to settle over the next two years and nearly half of all lending is currently flowing to investors.

“If the federal government in the May budget eliminates or substantially reduces the capital gains discount, that will be another factor investors couldn’t ignore,” he said.

“If investors think they’re not going to get the return they expected, then I think you could start to see more of a negative impact on the property market.

“Once these things start happening they take on a life of their own and if property prices start falling other investors might start offloading properties.”

Most banks in Australia apply a strict serviceability test for mortgage stress.

Westpac said it “constantly” stress-tested its mortgage portfolio.



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