Dr Dolittle’s ‘Push-Me-Pull-You’
This is the analogy that I instantly thought of when reading a recent September news article from ‘Mortgage Business’. Dr Dolittle’s animal the ‘Push-Me-Pull-You’ was what I would best describe as a ‘two headed Lama’.
Obviously such an animal would have had great difficulty achieving any forward momentum due to disagreements in direction. In that September news article an interview was held with Stephen Koukoulas economist at ‘Market Economics’. He pointed out the difficulties currently being faced by lenders in getting the balance right between trying to attract and retain mortgage clients, at the same time as remaining compliant with responsible lending obligations.
I have spoken in past news articles about current and near future lending being impacted by a number of environmental factors:-
Slowing housing market values (reference: Corelogic’s National Home Index).
Tighter lending restrictions brought about by changes in Government regulations since 2016.
Weaker investment home lending demand impacted by increases in relevant interest rates as a result of Government regulatory changes.
Slowing foreign investment, again as a result of changes in Government regulation, particularly surrounding taxes and levies on foreign property investors.
The recent ongoing Royal Commission into banking and finance.
So getting back to Koukoulas, he says "with the housing market softening and investor demand dwindling, banks are faced with the question of whether or not to ease lending criteria to lure home loan customers?” “The banks make a lot of their money from mortgages — about two-thirds of their profits are mortgage or mortgage-related,” “If you’re having a housing decline with prices falling and investors perhaps stepping away as well, then that competition for business will be intense, but the question there is, do they really relax their lending criteria for that business, so they’ve got a real dilemma.”
At present, I am seeing both sides of this struggle between competition and risk being playing out in everyday live lending applications where one of the major lenders at present has not necessarily relaxed credit lending criteria, but applications are being treated fairly & on merit, as opposed to another major bank who is currently taking ‘policy’ to an extreme position, which in my view is so ‘bloody minded’ that they have neglected the fact that they are there to write business, and that ‘policy’ should always be treated as a guideline, & not a ‘bible’ as it were !! I will of course qualify that the business to be written needs to be of good quality, and in a market where property values have slipped somewhat that then brings added risk to a loan assessment.
I hope that ‘Push-Me-Pull-You’ soon works out which direction it would like to travel?
Ring Michael at COMPASS Lending & Finance on 6583 2211