Weekly wrap - Thursday, 30th October

What’s trending in lending

In the run home to Christmas, we’ve got 30 business days or 60-odd days in general to go - we are on the home stretch. Some of you may be wondering how long you have left if you want to sign a contract, buy a home and be in your new home before Christmas, which is an exciting thought. The short answer is that you're going to run out of time quickly. 

If that's your plan and timeline going forward, you're going to have a finance date and a settlement date. Ultimately, you've only got the next one to two weeks to sign the contract.

We're starting to see the emails flow from the banks giving us dates around when properties must be unconditional by, to be able to settle by the end of the year. They are being proactive which we think is a really good thing this time of year. 

Understanding the current market is key, the banks have already been prioritising contracts over refinancing and pre-approvals. Again, if you are also looking at the idea or starting the refinance, or if you're doing a purchase that includes a refinance or equity from a property, it’s important to understand the flow and effect that this is going to have. 

How do the APRA new lending rules affect you?

APRA’s new lending rules, which we've talked about a few times, come into effect on Monday. We'll be getting all the new calculators shortly, where the minimum assessment buffer rate the bank uses to determine your borrowing capacity will increase from 2.5% above the actual rate to 3%. We are waiting for those calculators to come out and then we'll get some clarity around what differences this is going to make. 

If you did a borrowing capacity six months ago, it's potentially going to be different come Monday. We’re lucky that our team gets to pull this apart and put them back together. We're already seeing some of the initial numbers that will have an impact for some that were potentially tight previously; others, maybe not. 

You heard it first here a few weeks ago, fixed rates are on the move 

As always, there's a sweet spot for each bank. Some have put two-year fixed rates up, some have put three year rates up, some have only changed owner-occupied rates. Others have only just touched their base investment. It's very difficult to keep up with, but that’s our job.

We have had a lot of clients that say that they are going to hold off because what if rates go down? If you've been thinking this, now might be a good time to explore. We're seeing anything from 0.15% up to 35 basis points, 0.15 to 0.35, it’s a bit of a mixture. Some have gone from 2.1% up to 2.4% and others have dramatically jumped. If you want to find out how this affects you and the options to look at, reach out and touch base with us.

CCR or Comprehensive Credit Reporting

Another update is around what we call - we love a good acronym in what we do - CCR or comprehensive credit reporting. That's around your credit files. We've talked about this before, however previously they would just show the big stuff - defaults, arrears, inquiries, bankruptcy and so on. Now your credit files are much more detailed. 

Your credit files show the conduct on your liabilities or your credit facilities. The next move that comes this month is the buy-now-pay-later (BNPL) facilities. These aren’t always the bad guys but are tracked and will show on your CCR as well. Everyone's got a version of it, it’s just understanding that information will be visible and also your Telcos. 

Buy now pay later is making an impact

Two years' worth of conduct is now reported on BNPL facilities. If you miss payments, the reporting starts at zero to 30 days late which is rated at #1 and then 30 to 60 days late, rated at #2 and so on. So those little moments when you’ve said ‘it’ll be right, I’ll just BNPL it', may not seem like a huge deal but then turns into ‘oh no I missed a payment and forgot.’ This honest mistake is marked as a late payment and has a flow-on effect on your credit score.

Even though comprehensive credit reporting had already crept in for credit cards, people are more aware of the BNPL facilities and probably more conscious because they are getting hit with $10 and $15 late fees, which is, unfortunately, becoming a big trend. If you do have BNPL, whilst it is very convenient and easy to use, it is something that is looked at very unfavourably by the banks. Even when you do close your BNPL account, it's still going to show up for the next two years. The quicker you can get rid of them the better. Watch this space and just be mindful of what buy now pay later apps will do to your credit score and credit file. 

As always if you need anything, reach out and get in touch. We're happy to help.