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Ed McKnight Opes Partners Economist on the potential changes for homeowners · The SME Stream

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  Speaker 1: And it is time to talk money. And joining me
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  Speaker 1: now is Ed McKnight from Opie's Partners. And there might
• 0:05
  Speaker 1: be some good news on the horinas. On the horizon
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  Speaker 1: for homeowner's Ed, there.
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  Speaker 2: Is, and it's all to do with the income side
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  Speaker 2: of your mortgage application. And the impact of it is
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  Speaker 2: that first home buyers, investors and anybody looking to take
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  Speaker 2: out a lot, out a loan might find it slightly easier.
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  Speaker 2: And it's not even just on the horizon, it's already happened.
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  Speaker 2: So for example, we've just had National's tax cuts come
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  Speaker 2: in and that gives some people twenty dollars a week
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  Speaker 2: extra in their pocket. Well, if both you and your
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  Speaker 2: partner get that twenty dollars a week and you're a
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  Speaker 2: first home buyer, that could help your mortgage application, but
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  Speaker 2: to the tune of about twenty two thousand dollars. So
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  Speaker 2: if you're a bit tight on income, that's what's stopping
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  Speaker 2: the bank from giving you a mortgage. Might help you
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  Speaker 2: out a little bit there For investors slightly more, that
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  Speaker 2: same twenty dollars a week each for a couple, that
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  Speaker 2: could give you an extra thirty two thousand.
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  Speaker 3: So is there any.
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  Speaker 1: Other criteria around getting a mortgage changing at the moment.
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  Speaker 2: Well, I'm glad you brought that up, because of course,
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  Speaker 2: there are two sides to a mortgage application. You've got
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  Speaker 2: to have enough deposit and you've got to have enough income,
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  Speaker 2: and the tax can't certainly help the income side. On
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  Speaker 2: the deposit side, though, the Reserve Bank has changed some
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  Speaker 2: of the rules I think it was later earlier this month,
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  Speaker 2: maybe the month before. That just mean that first time buyers,
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  Speaker 2: a few more of them will be able to get
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  Speaker 2: lower deposits. So that means that it's a bit more
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  Speaker 2: likely that they'll be able to get a mortgage with
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  Speaker 2: a ten percent deposit. One other change that I want
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  Speaker 2: to highlight that literally happens this week is that when
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  Speaker 2: you put in your mortgage application, the bank's not going
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  Speaker 2: to see if you can afford it based on the
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  Speaker 2: interest rate you're actually going to pay, which might be
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  Speaker 2: call it six and a half percent. Up until recently,
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  Speaker 2: they've been testing your mortgage application at nine percent. Well
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  Speaker 2: that's all changed this week. It's come down by a
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  Speaker 2: little bit. And the impact is that for a first
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  Speaker 2: home buyer, if you could borrow five hundred k before,
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  Speaker 2: you're now going to be able to afford an extra
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  Speaker 2: eleven k, and for an investor, it's about in an
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  Speaker 2: extra eighteen grand.
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  Speaker 1: So ed, why were they calculating that on such a
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  Speaker 1: high rate to begin with?
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  Speaker 2: Well, the banks want to make sure that even if
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  Speaker 2: interest rates go up, that you can still afford that mortgage,
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  Speaker 2: and that's really important. We've seen why that's so important recently.
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  Speaker 2: You know, back when interest rates were two point two
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  Speaker 2: two point three percent, the banks we're using about a
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  Speaker 2: six percent what we call a test rate, and that's
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  Speaker 2: just to make sure that as interest rates go up
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  Speaker 2: and they have recently, that you'd still be able to
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  Speaker 2: make those mortgage payments and that you wouldn't have to
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  Speaker 2: go to mortgage g sale. So it's very important that
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  Speaker 2: the banks do this. But now that they're seeing those
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  Speaker 2: interest rates come down, they're starting to say, hey, we
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  Speaker 2: can use a lower test rate.
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  Speaker 3: Have they gone far enough with these changes? Do you think?
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  Speaker 2: Well, I'm looking forward to seeing some more changes. I
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  Speaker 2: think we'd all like to see those test rates even lower.
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  Speaker 2: But the banks need to be cautious and it's important
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  Speaker 2: that they are. There are some other changes coming on
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  Speaker 2: the horizon. The triple CFA.
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  Speaker 4: That's the law that do you remember back on the
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  Speaker 4: day Forrancesca coming out a couple of years ago, we
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  Speaker 4: had all of these articles about if you spent too
• 3:16
  Speaker 4: much on coffee or you spent too much on herber each.
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  Speaker 3: I've got too many streaming services, Ed.
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  Speaker 2: Oh, do you know what?
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  Speaker 4: I was applied for boockets the other day for.
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  Speaker 2: Tesca, and the walk broker comes back to me and says,
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  Speaker 2: can you please explain the nature of these expenses? And
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  Speaker 2: one of them was Netflix, and I said, I'm not
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  Speaker 2: sure what you want me to explain? Pretty straightforward, but
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  Speaker 2: we are sex of changes already come and west Pax
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  Speaker 2: loosen some of the criteria specifically for investors. That means
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  Speaker 2: an investor might be able to borrow extra eighty thousand dollars.
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  Speaker 2: I'm looking forward to seeing some changes once the law
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  Speaker 2: is actually passed, or the updated law has actually passed.
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  Speaker 2: That's going to be really good for the first time
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  Speaker 2: buyas Ed.
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  Speaker 3: Thanks so much for your thoughts this morning. Appreciate it.
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  Speaker 4: Thanks.
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  Speaker 2: Franchi's good