Changes to Resi Renew and Restart Construction Product

Effective 1 March 2019 Off the back of strong demand for Renew / Restart (Pepper Money) construction loan products in 2018, Resi are making changes to their construction offering in order to ensure a balanced portfolio is maintained.

Effective 1 March 2019, Pepper Money will no longer accept applications for Renew Near Prime Construction and Renew Prime Alt Doc Construction products.

For the Renew Prime Full Doc and Renew Ultra Full Doc Construction products, a minimum NSR of 1.10 is required where the LVR is <= 90%, and a minimum NSR of 1.35 for loans where the LVR is > 90%

Effective 4 March, to assist with the verification of income and expenses, Pepper will require all loan applications to be accompanied by three months' worth of personal transactional bank statements, that have been issued within the last 30 days.

To assist with a smoother application process, download the Resi Renew / Restart application process; this document outlines the latest contact points and how the application process flows.

NO RISK FEES Near Prime and Specialist

Near Prime: No risk fees up to 85% on most products

  • Unique pricing proposition which minimises entry costs (no risk fees for many customers) making Resi's solution the cheapest in market for those that need a funding solution as a stepping stone back to prime lending.
  • Full Doc, Alt Doc (Declaration of financial position plus one of: Accountant Letter; 6 months Bank Statements or 6 months BAS)
  • Unlimited defaults, judgements and writs up to $1,000 accepted (paid or unpaid)
  • Unlimited defaults, judgements and writs > $1,000, registered > 24 months (paid or unpaid) accepted
  • Discharged from bankruptcy (1 day accepted)
  • Debt consolidation for an unlimited number of debts including payout of ATO debts

Resi's loan product is the best in market for someone that needs a solution today and intends to refinance into prime within 2 - 4 years' time.

Specialist: No risk fees up to 85% on most products

  • Unique pricing proposition which minimises entry costs (no risk fees for many customers) making Resi's solution the cheapest in market for those that need a funding solution as a stepping stone back to prime lending.
  • Full Doc, Alt Doc (Declaration of financial position plus one of: Accountant Letter; 6 months Bank Statements or 6 months BAS)
  • Unlimited defaults, judgements and writs up to $1,000 accepted (paid or unpaid)
  • Unlimited defaults, judgements or writs from 1 credit event < 12 months (paid or unpaid)
  • Discharged from bankruptcy (1 day accepted)
  • Cash out up to 80% LVR for acceptable purposes including renovations and business use
  • Debt consolidation for an unlimited number of debts including payout of ATO debt

Download the Latest Resi Rate Sheet

Changes to ING Commissions

ING will change the way it calculates upfront broker commissions to align to the Combined Industry Forum's package of reforms on utilisation.

Effective from 1 January 2019, ING will calculate upfront commissions on the residential loan balance utilised.

Upfront commissions will be based on the residential loan balance net of any offset balance 5 calendar days following settlement.

What are the changes?

1. Upfront Commission on Utilisation Basis

In Line with the Combined Industry Forum reform package, ING will calculate upfront commission payment net of offset and redraw balances 5 calendar days following settlement.

2. Removal of Upfront Commission Bonus

ING will also be simplifying their upfront commission model by removing the current bonus (Owner Occupied & Orange Advantage) and split current spend on these commissions on LVR model by substituting the difference into each LVR band.

New Model

LVR

> 80%

80% and > 60%

60%

Upfront

52.5 bps

62.5 bps

72.5 bps

CBA CEO Weighs in on Flat-Fee Model

Source: The Adviser

Appearing before the House of Representatives Standing Committee on Economics, CEO of the Commonwealth Bank of Australia Matt Comyn was asked about his thoughts on the proposed changes to broker remuneration given the recommendations in the final report from the royal commission and the responses from the government and Labor party.

In his response, Mr Comyn appeared to endorse the Coalition government and Labor party's approach to broker remuneration reform.

"We are supportive of improving customer outcomes and we believe that the recommendations and the consideration that have been given by both sides of politics are appropriate and well-considered," he said.

Mr Comyn went on to acknowledge that a flat-fee model would be "appropriate" in removing certain conflicts of interests, including those associated with loan sizes. He has previously voiced his support for a consumer-pays model and the introduction of a best interests duty, and again referred committee members to the evidence he provided before the banking royal commission.

During the royal commission hearings, CBA CEO Matt Comyn revealed that while the major bank had sought to introduce a "flat-fee" commission-based model in January 2018, it later abandoned these plans in fear that the rest of the sector would not follow suit.

"We come to a view that nobody will follow, we will suffer material degradation in volume & we will not improve customer outcomes," Mr Comyn said last year. At the time, Mr Comyn also expressed his belief that a consumer-pays fee-for-service model, similar to that operating in the Netherlands, was "the most attractive model" but that CBA was unable to embrace it due to fears that "no one would follow in the absence of regulatory intervention".

Speaking to the House of Representatives Standing Committee on Economics on Friday (8 March), Mr Comyn said: "Well, I think flat-fees are appropriate to remove conflicts of interest as they relate to the loan size. There are of course lots of different ways to design the fee structure.

"We've given a lot of thought to this particular topic in the past. It's one of the areas that I was examined on. There are pros and cons with any fee structure," he said.

The head of the major bank told the committee: "We've given a lot of thought to, as I mentioned earlier, ensuring that the mortgage broking industry remains viable and is able to provide access and distribution particularly to meet those customer needs but also to facilitate competition.

"We think it's important that, as part of improving customer outcomes, the remuneration would be free (of) - or at least seek to manage or reduce - potential conflicts of interest. We had given previous consideration to flat-fees as a way to do that - of course how and where to set the flat-fee. It is an important consideration."

He continued: "I think the materials that we'd prepared on this particular topic are a matter for the public record and were examined as part of round 7 (of the royal commission hearings) as part of my evidence. We gave the topic a lot of thought and from my view, there is some complexity and a lot of consideration that needs to be given to exactly how to set and design that."

Mr Comyn added: "The commission and the counsel assisting referred to a number of documents I authored around my view as it relates to those recommendations," Mr Comyn continued.

"Clearly, we acknowledge and support the recommendations and I'd separate those in the context of both impacts around trail and changes to the upfront commissions, and also to the introduction of a best interests duty."

CBA has also released an update on the actions it has taken in addressing all 76 of Commissioner Kenneth Hayne's recommendations, adding that it would work with the third-party industry to develop a solution on broker remuneration changes.

"We will work constructively with the broking industry as changes to remuneration are designed and implemented," the response read.

Australia Gains One Person Every Minute

By Paul Bennion, Managing Director of DEPPRO

Historically, population growth has been a key driver in the property market and one which investors follow closely to determine where is the most opportune place and time to invest in property.

Australia's population continues to rise strongly and by the end of February 2019, ABS figures show that the population of Australia has hit over 25,270,000.

Since Australia's population breached the historic 25 million milestone on 7 August 2018, the overall population has increased by more than 270,000 persons in just in seven months.

Overall, the ABS demographic figures reveal:

  • One birth every 1 minute and 40 seconds
  • One death every 3 minutes and 16 seconds,
  • One person arriving to live in Australia every 57 second,
  • One Australian resident leaving Australia to live overseas every 1 minute
  • and 49 seconds resulting in an overall total population increase of one person every 1 minute and 15 seconds.

Migration continues to a major contributor of Australia's population growth. It currently accounts for 60.6% of total population growth compared to a natural increase in population of 39.4%.

Victoria is currently recording the highest population growth in Australia followed by New South Wales and Queensland. These three States currently account for nearly 90% of Australia's annual population growth.

Population at end Jun qtr 2018

Change over previous year

Change over previous year

PRELIMINARY DATA

'000

'000

%


New South Wales

7 987.3

119.3

1.5

Victoria

6 459.8

138.2

2.2

Queensland

5 012.2

84.5

1.7

South Australia

1 736.4

12.5

0.7

Western Australia

2 595.9

21.7

0.8

Tasmania

528.1

5.7

1.1

Northern Territory

247.3

-0.2

-0.1

Australian Capital Territory

420.9

8.9

2.2

Australia(a)

24 992.4

390.5

1.6

Source ABS

These population trends are mirrored by the tax depreciation reports DEPPRO undertook for property investors last year with Victoria, New South Wales and Queensland showing large increases in investor activity.

In particular, DEPPRO have found strong demand from investors who had recently migrated to these three States and in particular Victoria.

Despite the large number of new migrants buying investment properties, there are still many who do not fully understand the generous tax benefits that they can obtain in Australia.

After arriving in Australia, many new migrants to Australia decide to buy investment properties as a way to create wealth without realising that there are generous tax benefits which they can claim relating to property investment in Australia.

For example, the tax laws relating to buying an investment property in the United Kingdom and Australia are very different in areas such as financial benefits relating to negative gearing and depreciation benefits.

In relation to tax deprecation benefits, overseas migrants for example, may not appreciate that the tax benefits obtained through depreciation can be equivalent to 60% of the total purchase price of the property.

If you have recently migrated to Australia and are planning to buy an investment property, you can obtain more information on the benefits of tax depreciation by visiting deppro.com.au

Treasurer Delays Trail Abolition Date

Source: The Adviser

Treasurer Josh Frydenberg has said that the government will look at reviewing the impacts of removing trail in three years' time rather than abolishing it next year as originally announced, following concerns regarding competition.

In an announcement on Tuesday (12 March), Treasurer Josh Frydenberg said that "following consultation with the mortgage broking industry and smaller lenders, the Coalition government has decided to not prohibit trail commissions on new loans but rather review their operation in three years' time".

The review, to be undertaken by the Council of Financial Regulators and the Australian Competition and Consumer Commission will therefore look at both the impacts of removing trail as well as the feasibility of continuing upfront commission payments.

Both the abolition of trail and upfront commissions were recommended by commissioner Hayne in his final report for the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

While the government had initially said in its official response to the final report that it would ban trail commission payments for new mortgages from 1 July 2020, the Treasurer has now said that the removal on trail will instead be reviewed in three years' time.

"Mortgage brokers are critically important for competition and delivering better consumer outcomes in the mortgage market. Almost 60 per cent of all residential mortgages are settled by mortgage brokers," Mr Frydenberg said on Tuesday.

"There are 16,000 mortgage brokers across Australia - many of which are small businesses - employing more than 27,000 people. The government wants to see more mortgage brokers, not less," he said.

The Treasurer added that ASIC's 2017 review of broker remuneration "did not identify trail commissions as directly leading to poor consumer outcomes and did not recommend the removal of trail commissions".

"Only the government can be trusted to protect the mortgage broking sector and ensure that competition is strengthened so consumers get a better deal," he said.

Mr Frydenberg added that the government was "taking action on all 76 recommendations contained in the final report"of the banking royal commission and had already announced a number of new measures that will be brought in, including:

  • a best interests duty that will legally obligate mortgage brokers to act in the best interests of consumers
  • a new requirement that the value of upfront commissions be linked to the amount drawn down by consumers
  • a ban on campaign and volume-based commissions
  • a two-year limit on commission clawbacks

"These changes will address conflicts of interest in the industry by better aligning the interests of consumers and mortgage brokers," Treasurer Frydenberg said.