There are some significant changes to Australia’s banking system currently happening, and we felt it was important you are aware of these, as these changes are likely to impact on all Australian mortgage holders.
Since the GFC, the global banking industry has been working on reducing the risks within banking systems. One of the key “de-risking” decisions is a requirement for lenders (authorised deposit-taking institutions) to hold more money (capital) in reserve.
This is designed to make our banks stronger and safer. However, with strength comes additional costs, which will eventually be passed on to customers and shareholders.
Every deposit-taking lender has been instructed to increase the level of money they hold in reserve by the 1st of July 2016. This additional money is being raised on the stock market and via asset sales. Almost every day we are seeing articles that reflect this effort to increase reserves.
Today, Smartline has received news from one of Australia’s major banks that their home loan and investment loan rates will increase by 0.20% for all existing mortgage holders. The reason for this increase is “To meet these new rules, including the significant amount of capital that we must now hold against residential mortgages”.
This is on top of a range of changes all ready announced across the industry, impacting on rates, fees, credit policy and products. We can expect further changes over the coming months as the Australian mortgage industry continues to respond.
While some of these changes will increase costs for some borrowers, for others there will be good news as the banks compete harder for the type of loans they want.
In short, the variations between lenders is growing more pronounced, and seeking advise prior to acting on new or existing mortgages is increasingly important.
Please make sure you contact me for advice before you make any decisions in response to this information.