Anyone who has looked into getting a loan since the Royal Commission start would have found how much harder it now is.
Part of responsible lending changes that have been rolled out include the need for more information relating to your expenses, income and existing debts need to be provided, only to have your predicted borrowing capacity come back far less then you were expecting. While annoying for some, it’s actually safeguarding our market for all of us investors.
This tightening of lending and reduction of borrowing capacity is also clearly linked to buying activity. Take Melbourne and Sydney for example, as prices increased and borrowing capacity decreased it created a gap between buyers and sellers.
This has resulted in buyers looking further afield for investment opportunities outside of these major capitals and starting to increase demand in other “Hot Spot” locations. As well as some of the smaller capital cities.
In my opinion the direct impact of the Royal Commission on the market will be minimal but the clear change will be the way that you get a loan.
Up to now, over half of all people applying for a home loan do so through a mortgage broker. And now with the Royal Commission suggesting the removal of trailing commissions and bank paid up front commissions, and instead be replaced by an upfront fee paid by the person applying for the loan.
At this stage, the Government has rejected the upfront fee model and instead recommended that the banks pay this fee. So for now, you can still use a mortgage broker without paying an upfront fee, but this may change.
I feel it should change, the current model is broken! In the field of real estate, it’s clear that whoever pays your wage, is your client and the person you have an obligation to represent. Which in Mortgage brokers situation is the bank. Brokers are currently renumerated for selling a product.
But, banks are unlikely to pass these savings onto consumers, so I feel the royal commission has failed to assist consumers in this regard.