News Archives - Pearl Financial

Category Archives for "News"

Jan 06

ANZ Updated Its Banking Code Provisions

By Shane | News

One of the four major banks in Australia has made revisions on their home lending policy in accordance with the new banking code that was recently implemented.

ANZ has recently updated its co-borrower and financial abuse provisions as provided by the new Banking Code of Practice.

The purpose of their revisions is to address the concerns within the original wording of the declaration forms from which the broking industry stakeholders are worried to impose legal obligations on brokers who are unqualified to assess a borrower’s vulnerability.

Let Us Take A Look The Changes That ANZ Has Made:

The broker must document the details of the substantial benefit if each co-borrower is receiving a substantial benefit from a loan. This applies to the following situation:

  • When the co-borrower will acquire a legal rightful share or a reasonable interest in assets purchased with the loan funds.
  • When a rightful share of the loan funds is used to repay the co-borrowers debts or other obligations owed by the co-borrowers.

If in the case that substantial benefit can’t be proven, some additional questions are required in order to protect a co-borrower.

  • They have stated that all co-borrowers should understand all the involved risks before entering into the loan. Similarly, they should know the difference between being a co-borrower and a guarantor.
  • The co-borrowers should provide reasons why they want to become a co-borrower, and this must be in line with the lending policy.

In addition, ANZ revised its financial abuse declaration form in which a broker’s obligation is to make sure that all throughout their dealings in accordance with the loan application that:

  • None of their applicants has stated that he or she is subject to financial abuse
  • They have not seen anything that they would consider to be a form of financial abuse.

All of the revisions from the ANZ were implemented after the Australian Banking Association, the Mortgage & Finance Association of Australia, and the Finance Brokers Association of Australia have all agreed on a common strategy to identify financial abuse in a co-borrower arrangement.

Dec 19

Canstar Have A New Analysis On The Current Situation Of The Mortgage Market

By Shane | News

The Variable Mortgage interest rates have gone down to 2.89%, this is in line with the monetary policy adjustments of the RBA (Reserve Bank of Australia).

Canstar, a research and expert ratings agency in Australia, have presented a snapshot of the mortgage rate environment in compliance with the RBA’s consecutive adjustments with their monetary policy which predicted that cash rate fall by a total of 50 basis point to a new record low of 1%.

RBA’s main objective why they need to have a back to back cut rates is to encourage the labour market, stating that lower rates could help support the needed growth in employment. The mortgage market promptly responded to the cut rates as they have already implemented it to their home loan clients.

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Dec 19

NAB Last Among The Big Four To Cut Rates

By Shane | News

NAB (National Australia Bank), one of the 4 major banks in Australia, has updated its mortgage serviceability assessment policy.

Their amendment is in response to APRA’s (Australian Prudential Regulation Authority) changes to its home lending guidance earlier this month which allowed banks greater flexibility to set their testing rates after scrapping a minimum of 7% interest for loan applications by up to 2.5%.

With APRA’s easing credit conditions, it is intended to boost the borrowing capacity of many new customers, the RBA (Reserve Bank of Australia) has stated that the conditions in the housing market were gradually stabilizing following a drawn-out property downturn, but noted fall in prices had slowed in some markets and auction clearance rates increased.

NAB has lowered to a minimum of 5.5%, in line with its major peers. its interest rate floor to 5.5% and increased its interest rate buffer to 2.5% which covers all new home loan applications starting August 5.

It is the latest among the 4 major banks to amend it serviceability policy and joining all other competitors, the ANZ (Australia and New Zealand Banking Group), Westpac, and CBA (Commonwealth Bank), Macquarie, MyState Bank, Bendigo and Adelaide Bank, Suncorp, the Bank of Sydney and Auswide Bank.

The new NAB interest rate floor is in line with ANZ’s announcement that they would lower their interest rate floor to 5.5%.

The bank’s announcement has seen it undercut CBA and Westpac as they are the 2 major competitors which dropped their rates to only 5.7%.

At this point, Macquarie holds the lowest interest rate floor of 5.3%, on the other hand, MyState dropped its interest rate floor to only 6.2%.

Dec 18

RBA Made Changes For Their ESA Policy

By Shane | News

What Is ESA (Exchange Settlement Account)?

ESA is an account that all banks should have for the purpose of making payments with each other within the Australian payments system. These Exchange Settlement Accounts are owned by the Reserve Bank of Australia, there must be positive balances and are used to settle debts that have accumulated in the clearing process.

They are also used as a precautionary measure, as the RBA has committed to cover any gaps in payments among the members, this is to ensure the Australian payments system functions all the time.

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Dec 16

Increased Percentage Rate Of First Home Buyers

By Shane | First Home Buyer , News

A research conducted by CBA (Commonwealth Bank of Australia) has shown that 91% of First Home Buyers are confident that their dream of owning their own home is already within reach.

The percentage came from a total sample size of 1,012 home loan clients, including non-CBA mortgagors. The result from CBA, which gives an outstanding 91% only means that home ownership is now feasible. The research result has a significant difference in comparison to the research result in the previous year, in which 1 out of 5 Australians or 20% have said that home ownership is not feasible.

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Dec 12

SME’s Prefer Non-Bank Lenders According To PayPal

By Shane | News

SMEs (Small-to-Medium Enterprises) struggles to get a loan application from traditional bank lenders over the years. It is the reason why they go instead to Non-Bank Lenders. A study has shown that SMEs turn their backs away from banks and explore their options for loans to Non-Bank Lenders and their numbers are more likely to increase in the future.

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Dec 10

APRA’s Move To Increase Borrowing Power Capacity

By Shane | News

The critical constraint on borrowing limits that were implemented in late 2014 has been removed by APRA (Australian Prudential Regulation Authority). It is another move that may encourage the idleness of the property market.

To make it more specific, APRA has removed its quantitative guidance on the level of the serviceability floor rate at 7%, which ADIs (Authorized Deposit-taking Institutions) or banks use to assess home loan applications.

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Dec 10

Highest Debt Recorded In The Australian History

By Shane | News

Household debt to income ratio is the highest in Australian history. It is based on the recently concluded statistics by the RBA (Reserve Bank of Australia) as of March this year. It stated that the household debt is already at 189.7 times the average household disposable income which is the highest level recorded.

This highest level recorded can be associated with the increased household costs, stable wage growth and higher mortgages which is an integral part of the major Australian cities’ high-priced housing market.

On the other hand, the above statement disregards the complications of the debt problem in Australia. It overlooks the technological changes to payment methods and spending habits which may be the reason for the rapid growth in consumer debt.

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Dec 05

AFCA To Further Assess Broker-Originated Loans

By Shane | News

A brokerage director has expressed his regret for the widening gap between the funding that would likely be acquired by the borrowers through a direct application from the bank and those who go through a broker.

Loan Saver’s Adviser, founder, and director, Mr. Colin Kidd, has stated that he had observed an evident risk concerning the brokers. He mentioned that brokers are not completing detailed expenditure analysis, and there is a difference between the way expenses are obtained by brokers and lenders.

Mr. Kidd has said that brokers are able to match the expenditure requirements of the lender but that the risks involved with the analysis will stay with the broker, he continued.

The Loan Saver Director added that in order to reduce the compliance risk, the brokers need to obtain valuable information about expenditure by the use of bank statements than any other requirements if they will directly apply in the bank. He then added that a signed budget is not acceptable as an expenditure analysis.

Upon considering the recent dealings with lenders,

the Loan Saver Director said that there are cases where he had included a significant singular expense in the required analysis. He had explained in the notes that it is a singular expense linked to a new business to be launch. However, the lender has indicated that the new small-business owner’s expenditure was too big to pass its serviceability assessment. This happened despite a clean credit record of the customer.

Lenders now need to follow the indicated expenditure noted in the statement of position. Thus, notwithstanding the singular expense, they will use the full amount. Now, if clients will go directly to their lender, they don’t need to go through with the expenditure analysis, but rather, the lender will accept the client’s statement of position, and the loan will be processed.

MR. Kidd had noticed that some borrowers have been able to acquire a loan directly from the bank which they could not do through a broker. Having a higher chance of obtaining a loan directly from the bank than through a broker will affect their means of deciding where to apply for finance.

One of the main reason why clients go directly is because of the long waiting period that if they go directly through a bank, they won’t wait for too long as they will be getting an approval. Therefore, bank managers write loans that were declined by the brokers. This is why there is an existing widening gap between what can be funded through a lender and what can be funded through a broker. 

Moreover, the AFCA (Australian Financial Complaints Authority) has been assessing historical cases based on the current credit policy requirements around expenditure. They have been applying retroactively the current assessment criteria to loans written before the Global financial crisis, and this is a cause for alarm, especially for the brokers who write large amounts as they will probably face litigation.

Dec 05

Pepper Money Has Implemented A New Offer For Brokers

By Shane | News

Pepper Money is Australia’s leading non-bank lender, which covers both mortgage brokers and for many non-bank lenders as a financer for wholesale. As a non-bank, they operate a slightly different way as compared to banks and other major financing institutions.

With this regard, Pepper Money just released a new offer for brokers and their prime and near-prime customers. Australia’s number one non-bank lender has announced that brokers will be able to offer their customers discounted interest rates offered in various LVR (Loan-to-Value Ratio) bands applicable to all of their prime and near-prime products. It shall cover all full documentation and alternative documentation customers except for construction loans.

In this manner, brokers can now offer their prime home loan customers rates from 3.36% per annum, which has a comparison rate of 3.56% per annum.

At the same time, brokers will also be able to access near-prime rates from 4.26% per annum with a comparison rate of 4.76% per annum. This limited-time offer is valid until August 30, 2019.

The Director of Sales and Distribution for Pepper Money has stated that their goal is to help more families and more people to achieve their dream of homeownership in Australia which we all know that in real life, the right interest rate can make all the difference.

He also added that they are committed to providing brokers and their customers with flexible and competitive home loan products to help them achieve their goals. This is the main purpose of their offering, which is to deliver real-life solutions for all sorts of real-life situations.

Pepper Money’s decision was in addition to the 0.25 percentage point rate cut declared last month. Their declaration also takes place following their move to reduce variable interest rate for their existing customers by 20 basis points, this is in compliance with RBA’s (Reserve Bank of Australia) cash rate decision.

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