Will the Markets be Impacted by the Hayne Report?
25 February 2019
How Will the Royal Commission Impact on the Property Market?
The Fallout from the Royal Commission, The Hayne Report and the Property Markets
There is no doubt – “the times they are a changin” in the finance world.
Towards the end of 2017, APRA brought in changes to the way people could access finance and the effects where certainly felt during 2018, the tighter controls on borrowing took the heat out of the Sydney and Melbourne property markets, the impact of which we are still watching unfold.
The Royal Commission into Banking (RCB) and subsequent recommendations in the Haynes Report, in short, reviewed the changes APRA and the banks had already made to access finance, and was generally happy with the measures that were put in place.
However, the big stick has been taken to the Mortgage Brokers, about how they are paid and their role in the finance process. There was issue taken by Mr Hayne, about the fact that banks cover the Mortgage Brokerage fee and pay them trailing commissions for the life of the loan.
Despite this payment process having been reviewed several times by independent bodies in recent years and found to be fair. The Hayne Report claims that this is the root of all evil and should outlawed. The major winners out of this will be the banks, and if all the recommendations are brought into play, the mortgage broking industry as we know it will be all but wiped out.
The Key Points to understand are as follows
· Will it be harder to borrow money?
No – It was already harder to borrow money due to the APRA changes in late 2017, So the Hayne report won’t be making it any harder than it already is.
· Can you still use a Mortgage Broker?
Yes – for the time being. Depending on what recommendations are finally adopted will depend on the viability of the Mortgage Broking industry.
· Will the cost of borrowing increase?
Possibly – Once again it will come down to recommendations that are finally adopted and how they are implemented. If Borrowers must pay for broking fees themselves, instead of the banks covering the cost, it will be bad for brokers, if banks also have to charge an upfront fee, it will mean borrowers will find it more expensive and harder to change loans or banks.
· Will this impact on the Property Markets?
Yes and No – Yes in the way that we have already seen, with over priced property markets like Sydney and Melbourne experiencing a fall in Median house prices, although it should be noted that not all Sydney and Melbourne Suburbs are falling in value. Some are still increasing. The biggest impacted will be the restriction on finance causing a lack of demand, which creates a price decrease or market slow down.
The No part of the answer is that markets that didn’t that massive price rise or started at a low value level, won’t be impacted as much and will probably continue to steadily rise. With all this in mind 2019 will be the year of Return on Investment (ROI).
With capital gain expected to take a back seat for a while, the yield/ROI is already starting to be a major consideration.
If you want to know more about how to determine the ROI or any other property investment matters, please feel free to get in touch.
