Not sure if most forumites are aware but lenders are slowly starting to change their serviceability criteria by altering the yard stick they use when assessing Living Expenses.
Up until June 30 most lenders used the HPI or Henderson Povery Index but are now starting to apply the HEM or Household Expenditure Measure which has been developed by the University of Melbourne using expenditure data from ABS Household Expenditure Surveys.
Whilst this not mean much to investors at this stage the amount you can borrow will start to reduce considerably over time depending on the lender.
As an example i have just received an email from one of the Big 5 Banks advising that they are changing to this method of calculation effective tomorrow.
With them a Single Adult used to be assessed at circa $16085 and effective tomorrow this increases to $22114 which reduces the amount you can borrow by circa $60,000.
For an Adult couple with 2 children it gets worse.
Funnily enough the figure reverses for multiple dependants.
An Adult couple with 6 children used to be assessed at around $43,260 and now this will drop to $25,482.
This is going to have a significant affect on borrowing amounts going forward and will see a greater variance between lenders.
If anyone needs any further information please do not hesitate to contact me.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Qlds007 wrote:An Adult couple with 6 children used to be assessed at around $43,260 and now this will drop to $25,482.Good old bank logic
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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Ever since this idiot Federal government came to power they keep wrecking the economy and tightening personal freedom. They are about control. The quicker they are thrown out of office the quicker sanity can return
Nigel Kibel | Property Know How
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What actually really concerns me that some spent 6 months at Melbourne Uni only to come up with the fact that 2 Adults with 6 kids spends less than 6 adults with 2 kids.
That and the fact that lenders listen and then agree.
Go figure is about right.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Same thing happened in May with NAB and Homeside who changed their living expenses to utilise the HEM method.
Before that, living expenses on a married couple was very generous, was able to process a lot of deals through where it couldn't service elsewhere, and then it increased 25% overnight.
Exactly Tom and Bank West and CBA changed yesterday.
OMG being single and they crusify you these days.
And there is me some days wishing i was single after my wife goes on a serious shopping spree with her AMEX card.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Carbon tax must be hitting home already
It's a pretty decent increase by Bankwest on living expenses. Homeside, despite using the same method is way lower on living expenses across the board. Combine this with the phasing out of their lo-doc product, in my opinion Bankwest can only lose customers to other lenders.
Nigel Kibel wrote:Ever since this idiot Federal government came to power they keep wrecking the economy and tightening personal freedom. They are about control. The quicker they are thrown out of office the quicker sanity can returnSeconded!
Socialism mixed up with extremist policy that about sums it up when you have a labor and Greens minority government in place. What a joke!
Wouldn’t want people to become financially secure and be able to look after themselves would they?
Roll on the federal election!
Qlds007 wrote:What actually really concerns me that some spent 6 months at Melbourne Uni only to come up with the fact that 2 Adults with 6 kids spends less than 6 adults with 2 kids.That and the fact that lenders listen and then agree.
Go figure is about right.
Cheers
Yours in Finance
LOL! After our conversation tonight Richard I went and vented to the wife…….
Now she wants more kids!
Typical…….
I walked right into that one! LOL!
Jack
Jack if you can time it right and have triplets in the next 5 months you can buy 2 more IP's lol.
Isnt it ridiculous……………
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks heaps for sharing this info Richard you're a star
Jacqui Middleton | Middleton Buyers Advocates
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Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Are we living in North Korea? Such a government controlled country!!!
Richard since i am a tightarse with money for our next IP can we put this on the application?Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
Johann only in the covering notes.
Most lenders have now removed the Yes / No question "Are you a tight ass or not" ?
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Qlds007 wrote:Jack if you can time it right and have triplets in the next 5 months you can buy 2 more IP's lol.Isnt it ridiculous……………
Cheers
Yours in Finance
You’re going to get me in trouble Richard, with 3 boys already this may be the leverage Sally needs to push me to try for the allusive girl lol.
If anyone says anything I’ll deny everything, infact this conversation never took place. lol!
Richard, in your experience is this situation likely to change? Or is this now set in stone for all eternity or is it something the lenders fiddle with from time to time as with other serviceability requirements with applying for credit?
Jack
Jack i could lend you my 3 and my oldest is a girl and very sensible.
Sally would love it ……
No i have to say a change in Govt could bring about changes in all areas of lending.
Also competition is a very strong alternation of a lenders policy. When you are arent getting any deals you try and see why.
In saying that all lenders are working towards to this model so less room for change at the mo.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Qlds007 wrote:Jack i could lend you my 3 and my oldest is a girl and very sensible.Sally would love it ……
No i have to say a change in Govt could bring about changes in all areas of lending.
Also competition is a very strong alternation of a lenders policy. When you are arent getting any deals you try and see why.
In saying that all lenders are working towards to this model so less room for change at the mo.
Cheers
Yours in Finance
LOL! I might just hold you to that mate!
Well there’s light at the end of the tunnel……roll on the Federal election!
Yeh that or the birth of your triplets whichever comes first lol …………….
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard,
Can you post the link to the source. I am more interested to look at the change for a couple with 2 kids
Steve
Hi Steve
Unfortunately there is no link to such information as each lender works off its own serviceability formula.
As i mentioned lenders have adopted the Household Expenditure Model for assessing their Living Allowance expenditure and this means a reduction in how much you can borrow.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I'm sniffing a business opportunity here. Loaning out kids to people who are about to apply for finance. Such entrepreneurship!
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
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