Aggregator head warns brokers of side effects of APRA crackdown

by Julia Corderoy14 Oct 2015
The chief executive of major aggregator Connective is encouraging brokers to urgently address a “concerning” side effect of APRA’s crackdown on investment lending.

Speaking to Australian Broker, Glenn Lees said a major consequence of APRA’s new lending restrictions affects off-the-plan buyers.

“The side-effects most important to watch are some of the unintended consequences that play out in the property market. The headline example we talk about a bit is off-the-plan purchases for an investment purposes,” he told Australian Broker.

“For instance, a consumer may have signed up to buy a property 12 months ago… [however] since they signed up for that property the lending landscape has changed dramatically — the LVRs available have decreased and borrowing capacity has decreased as a result of various lenders choosing to respond in different ways to the APRA requirements. This means that person who signed up for that property may not be able to settle it when the time comes because the lending rules have changed.”

As the effects to off-the-plan investors becomes more common as lenders continue to tighten policies, Lees is urging brokers to “deal with it now”.

“We are starting to hear more evidence of it happening and it is concerning. It is definitely something for brokers to be managing with their customers. If they have a pipeline of off-the-plan customers they need to be dealing with it now,” he told Australian Broker.

“The majority of brokers are very aware of it and are doing it —[Connective] has been keen to get that message out to our brokers because it is all about looking after their customers. 

“No one is at fault, it is just the goalposts have moved.”

Lees also advises brokers to be wary of the potential domino effect.

“The lending environment is what it is and it is potentially problematic…[I]n valuations, for example, if you had a proportion of sales in an off-the-plan development that couldn’t settle because of changes to serviceability, that then affects the valuation for the rest of the property. Does that then flow on and affect those that can still service the debt, that now need a higher LVR? There is that risk of a domino effect,” he told Australian Broker.