A LIBERAL WIN IN THE FEDERAL ELECTION | APRA SCRAPS 7% LOAN BUFFER | RBA SIGNALS RATE CUT | SIGNIFIC
A Liberal win in the Federal Election means no changes to Capital Gains Taxation or Negative Gearing. More importantly the unsureness or nervousness surrounding the proposed Labor changes have gone away.
APRA Scraps 7% Loan Buffer – The largest impediment to adding to your property portfolio has been APRA’s requirement for banks to assess your ability to repay your loans using a rate of 7%. APRA have recognised this is no longer a valid position to take. Banks are now allowed to set their own minimum buffer. However, they still need to test if a borrower could service a loan assuming a rate 2.5% higher than the lending rate applied to the borrower. For most Silverhall clients, your current interest rates on your own homes and your investment properties will be between 3.90% to 4.25%. In my mind the most significant change to the existing restrictive lending criteria
RBA signals Rate Cut - Reserve Bank of Australia governor Philip Lowe has given his clearest signal yet that interest rates will be cut next month (June 2019). Most banks and analysts have been predicting one or two rate cuts this year. However, such a forward looking statement by the governor is very positive. The market is also expecting the banks to pass on all or most of any RBA rate cut which means an immediate improvement in your borrowing capacity when you combine it with APRA’s elimination of its buffer
What do we think this means for property? We believe this will have a significant improvement in confidence, with the ability to borrow more for investment. And, a reduction in the amount of your interest payments. This will lead to a positive effect on demand for property with upward pressure selling prices.