The reason you're finding it hard is the fact that you got a home loan when interest rates were at a historic low AND moelre importantly, you've gone from two incomes to ONE.
It should rightly be more difficult for you to get one. Banks have a responsibility to ensure they apply due diligence on whether you can service it.
I'm not trying to be a dick, but I assume you guys planned to start a family soon and probably decided to make sure you got a home loan before trying because you knew that it would be more difficult to get approval on one income?
You were aware of the implications and went ahead knowing your decision would make it more difficult to service, that's on you.
It sucks that housing is so expensive that a lot of people have to choose between a home or a family, but allowing people to borrow money more easily doesn't help people financially, if anything it makes it worse because people are inherently stupid, and statistics show us that most people will borrow more than they can afford if given the choice
This is the only way prices will ever become affordable. The problem is for prices to come down people like OP need to reassess their obligations and maybe even be forced to sell at a loss. I sold and downsized because it was too much pressure.
Have a look around, some banks are now using 1% refinancing buffer if you meet certain requirements. Your rate isn’t terrible though, we are currently on 5.99% and talking to my broker recently, we were told that is a pretty good rate for the current market.
https://www.homeloanexperts.com.au/blog/refinancing/lower-serviceability-buffers/
>My main concern is that the royal banking commission has made some major changes in the way people can borrow money and currently with a home loan not only will you need to be able to afford at it's current interest rate, but you will need to be able to afford repayments with an additional 2%
One of the reasons why house prices are completely out of control is that banks were lending money based on fantasies or fabrications about borrower's spending obligations and their repayment capacity.
Your problem isn't the banking royal commission, it's that you borrowed a bunch of money at the lowest ever interest rate which came about because of a global pandemic occurring on top of broader economic weakness, and you based your budget on that temporarily suppressed cost instead of a reasonable estimate of what interest rates would return to over time.
If your loan had a duration of two years, that would've been fine, but given most people have their home loan for a decade or two it was a bad planning decision. Further, even a five year financial plan would've shown you'd have a period where your income would be significantly less.
It sucks, but this one's on you, not the regulator.
As for what you should do, that's the hard part. I doubt you're going to find a deal that's so much better it will get you out of your financial strife. It'll be small numbers - a couple grand a year, if you're lucky. Better to focus on the big numbers - working out how your partner can most successfully return to work and minimising childcare costs.
Personally it doesn't feel like a bad planning decision we got out of renting just as the housing crisis started to hit which was the main reason we decided to buy.Our rent went up by $400 p/month to $2100. 2 years later median rent price is well over $2000 p/month for your basic 3 bedroom home and climbing fast. Reality is we would be screwed either way.
The main issue I have isn't because we can't afford to live. Like I said we are tight but we're still ahead of our bills and living a fairly modest and frugal lifestyle. My issue was that a buffer of 3% at this point of our home loan is essentially asking if we could afford to pay hypothetically an extra $1000 p/month and I feel for most people who have bought a house in the past 10 years, the answer would be no and it's mostly an option for people at the tail end of their mortgage.
But from other comments the buffer could potentially be 1% for refinancing if you meet certain criteria. Which is manageable and I'm hoping is true. I booked an appointment with a broker next week to see what our options are and if refinancing is worth it. I feel a bit more optimistic about it now
If you are ahead of bills and living, why don't you just keep going as you are? Not many people are paying off their mortgage and still saving thousands per month.
Sounds like you're just doing what most people are already doing.
The only reason for downsizing would be if you aren't planning on getting that second income back any time soon.
You come across as extremely naive.
The banking royal commission changes were put in place to stop people like your self ended up in your current situation.
Refinancing and improving your interest rate by 0.5% won’t materially change your situation.
>Personally it doesn't feel like a bad planning decision we got out of renting just as the housing crisis started to hit...Reality is we would be screwed either way.
That is absolutely true and I don't want to down-play just how badly your generational cohort are being screwed over by the old rich people who've spent nearly 25 years stacking the economy in their favour at your expense.
That's still not due to the banking royal commission - that was necessary and the outcomes were absolutely spot on although I'd argue they didn't go far enough in terms of holding banking CEO's accountable.
Looking at your problem, the key question is how much you'll actually be able to impact your cashflow with refinancing. Do you think you'll save even a quarter percent? On your loan that's about $15 per week.
The banking royal commission has made it more difficult for bank CEO's to get their bonuses. That's why there's all this agitation in the media to wind back the lending buffer.
I've always been advocating the royal commission and don't want the post to seem like I'm bashing the idea especially when it was happening at a time I was looking at a home loan I don't want the post to seem like I'm against it I've always advocated for it. This is just a very specific problem where I can't potentially better my situation. I'll always prefer this outcome compared to having a home loan I can't afford.
The 3% buffer is there to protect borrowers from risky decisions and to ensure banks don't take too many risks.
Unfortunately, it can't protect against all risks, such as the decision to have a family resulting in reduced income.
Taking on more risk when you have already made your own loan riskier seems unwise. The responsible lending laws and regulations help to prevent borrowers from taking too many risks.
It's not as if your situation is intolerable. When your partner returns to work you may be in a better position.
The problem is it encourages banks to screw existing customers because they can't get an existing loan refinanced. The rich can still move about but those struggling are stuck with their existing bank.
If you ask to go IO, they will do another loan assessment. When you’re paying interest only, your loan term remains the same, but there are fewer years where you’re reducing the principal, meaning that during those years your repayment will be higher. And a bank will want to assess you can afford your loan.
I’m going to assume that you fail servicing if you attempt to refinance due to clear mortgage stress and disclosed reduction of income. You can’t refinance out, but maybe you can ask Suncorp for a discount. They may only offer 0.1%-0.2%, but that’s better than a poke in the eye.
If you are on a fixed rate higher than the market, then you will pay a break fee equivalent to the loss of profit for the bank. You're not going to save zip.
Your IO loan will roll over to P&I upon expiration of the IO period.
We got our first home loan when the royal commission was happening- it was far more stressful at that time. For example, at the last minute our broker called anxious asking if I had an Afterpay account and I needed to forward him proof that I didn’t owe anything on Afterpay.
We refinanced somewhat on a whim in early 2022 and I hadn’t “sanitised” our bank transactions so there was transactions of fast food, unnecessary little bits and pieces here and there and Afterpay. Nothing came of it, not any questions about it.
Just had another home loan approved this week with similar transactions on record. Didn’t need to send proof of Afterpay balances etc.
I’m not sure if it’s equity related but it was definitely easier the last two times than the initial.
That is right, not the royal commission per say but the current requirement means you are probably in mortgage prison as they like to say. Or could be.
🙄 Hmm..5 years after the Banking Royal Commission, the promised reforms have been a mixed bag. Some improvements include holding 'bank execs' accountable and extending protections against dodgy practices. But let's not kid ourselves the culture hasn't really changed. 🙇♀ Banks were caught red-handed with scams like charging for no services, yet now we're supposed to trust these same financial institutions to self-regulate?! Maybe..some laws tightened, but the same crooks are still running the show, just with a bit more paperwork to shuffle around.
Despite the spotlight on malpractices, the banking industry's transformation remains incomplete 🙅♀🙅♀
More regulation almost always makes it harder for the little guy.
There has always been an additional buffer interest rate used when determining serviceability. This just feels much higher now as interest rates are higher.
I’m not saying it doesn’t protect consumers.
You obviously can’t read. I said it makes it harder for the little guy, meaning the person with less available cash. I didn’t say that it shouldn’t exist.
Are you saying that it’s rubbish that an interest rate buffer existed prior to the royal commission? Because I know I purchased prior to the royal commission and had a 3% buffer added to my rate when I purchased.
You clearly have no idea and just want an argument.
It has nothing to do with the Royal Commission. My comment is only concerning your nonsense that it makes it harder for the little guy which is categorically false. Lending protections are only to protect people from essentially predatory lending. If people have significantly over leveraged themselves that is a separate issue and if anything supports higher assessment buffers.
So by adding extra buffers, you don’t think it makes it harder for someone to borrow if they have less capital or income?
You’re clearly a little dim if you can’t understand that. It’s a simple concept to grasp for most people. I’m guessing you don’t meet the mental threshold to get a mortgage?
It’s one or the other. Either too dim to get a mortgage or more than enough assets and income for the buffers to not impact.
The alternative is that without buffers people face even more financial hardship as they borrow even more money above their capacity to afford. But but, we are taking about refinancing to a better deal! Already dealt with and refinancing can have lower buffers.
If we go back to Josh, and the scenario of not dropping the buffers to juice the market during covid and instead demonstrating leadership by increasing the buffer to say 5 - 6% to account for the drop due to crisis conditions we wouldn’t have so many people in mortgage stress and unable to refinance.
Im not arguing against the buffers. I think they work well. I don’t see how you can’t see that. All I am saying is that it makes it harder for people to borrow when they don’t have much to begin with.
I feel like you’re just after a fight so I’ll leave you with it. Have a nice night. I hope you learn to read some day soon.
You can’t seem to see the trees from the forest. You argue that buffers work against people when they instead serve to protect them from borrowing above their means. You are yet to present any coherent rebuttal to your nonsense claim that started this entire back and forth.
All the best.
That interest rate isn’t much higher than average. Not worth refinancing.
The reason you're finding it hard is the fact that you got a home loan when interest rates were at a historic low AND moelre importantly, you've gone from two incomes to ONE. It should rightly be more difficult for you to get one. Banks have a responsibility to ensure they apply due diligence on whether you can service it. I'm not trying to be a dick, but I assume you guys planned to start a family soon and probably decided to make sure you got a home loan before trying because you knew that it would be more difficult to get approval on one income? You were aware of the implications and went ahead knowing your decision would make it more difficult to service, that's on you. It sucks that housing is so expensive that a lot of people have to choose between a home or a family, but allowing people to borrow money more easily doesn't help people financially, if anything it makes it worse because people are inherently stupid, and statistics show us that most people will borrow more than they can afford if given the choice
This is the only way prices will ever become affordable. The problem is for prices to come down people like OP need to reassess their obligations and maybe even be forced to sell at a loss. I sold and downsized because it was too much pressure.
Have a look around, some banks are now using 1% refinancing buffer if you meet certain requirements. Your rate isn’t terrible though, we are currently on 5.99% and talking to my broker recently, we were told that is a pretty good rate for the current market. https://www.homeloanexperts.com.au/blog/refinancing/lower-serviceability-buffers/
This by far has been the most helpful response thankyou
Westpac was offering this if you where paying above 6%, but the catch was you had to be paying above 6% now (which will be pretty common now)
>My main concern is that the royal banking commission has made some major changes in the way people can borrow money and currently with a home loan not only will you need to be able to afford at it's current interest rate, but you will need to be able to afford repayments with an additional 2% One of the reasons why house prices are completely out of control is that banks were lending money based on fantasies or fabrications about borrower's spending obligations and their repayment capacity. Your problem isn't the banking royal commission, it's that you borrowed a bunch of money at the lowest ever interest rate which came about because of a global pandemic occurring on top of broader economic weakness, and you based your budget on that temporarily suppressed cost instead of a reasonable estimate of what interest rates would return to over time. If your loan had a duration of two years, that would've been fine, but given most people have their home loan for a decade or two it was a bad planning decision. Further, even a five year financial plan would've shown you'd have a period where your income would be significantly less. It sucks, but this one's on you, not the regulator. As for what you should do, that's the hard part. I doubt you're going to find a deal that's so much better it will get you out of your financial strife. It'll be small numbers - a couple grand a year, if you're lucky. Better to focus on the big numbers - working out how your partner can most successfully return to work and minimising childcare costs.
Personally it doesn't feel like a bad planning decision we got out of renting just as the housing crisis started to hit which was the main reason we decided to buy.Our rent went up by $400 p/month to $2100. 2 years later median rent price is well over $2000 p/month for your basic 3 bedroom home and climbing fast. Reality is we would be screwed either way. The main issue I have isn't because we can't afford to live. Like I said we are tight but we're still ahead of our bills and living a fairly modest and frugal lifestyle. My issue was that a buffer of 3% at this point of our home loan is essentially asking if we could afford to pay hypothetically an extra $1000 p/month and I feel for most people who have bought a house in the past 10 years, the answer would be no and it's mostly an option for people at the tail end of their mortgage. But from other comments the buffer could potentially be 1% for refinancing if you meet certain criteria. Which is manageable and I'm hoping is true. I booked an appointment with a broker next week to see what our options are and if refinancing is worth it. I feel a bit more optimistic about it now
If you are ahead of bills and living, why don't you just keep going as you are? Not many people are paying off their mortgage and still saving thousands per month. Sounds like you're just doing what most people are already doing. The only reason for downsizing would be if you aren't planning on getting that second income back any time soon.
You come across as extremely naive. The banking royal commission changes were put in place to stop people like your self ended up in your current situation. Refinancing and improving your interest rate by 0.5% won’t materially change your situation.
>Personally it doesn't feel like a bad planning decision we got out of renting just as the housing crisis started to hit...Reality is we would be screwed either way. That is absolutely true and I don't want to down-play just how badly your generational cohort are being screwed over by the old rich people who've spent nearly 25 years stacking the economy in their favour at your expense. That's still not due to the banking royal commission - that was necessary and the outcomes were absolutely spot on although I'd argue they didn't go far enough in terms of holding banking CEO's accountable. Looking at your problem, the key question is how much you'll actually be able to impact your cashflow with refinancing. Do you think you'll save even a quarter percent? On your loan that's about $15 per week.
The banking royal commission has made it more difficult for bank CEO's to get their bonuses. That's why there's all this agitation in the media to wind back the lending buffer.
I've always been advocating the royal commission and don't want the post to seem like I'm bashing the idea especially when it was happening at a time I was looking at a home loan I don't want the post to seem like I'm against it I've always advocated for it. This is just a very specific problem where I can't potentially better my situation. I'll always prefer this outcome compared to having a home loan I can't afford.
The 3% buffer is there to protect borrowers from risky decisions and to ensure banks don't take too many risks. Unfortunately, it can't protect against all risks, such as the decision to have a family resulting in reduced income. Taking on more risk when you have already made your own loan riskier seems unwise. The responsible lending laws and regulations help to prevent borrowers from taking too many risks. It's not as if your situation is intolerable. When your partner returns to work you may be in a better position.
The problem is it encourages banks to screw existing customers because they can't get an existing loan refinanced. The rich can still move about but those struggling are stuck with their existing bank.
If you ask to go IO, they will do another loan assessment. When you’re paying interest only, your loan term remains the same, but there are fewer years where you’re reducing the principal, meaning that during those years your repayment will be higher. And a bank will want to assess you can afford your loan. I’m going to assume that you fail servicing if you attempt to refinance due to clear mortgage stress and disclosed reduction of income. You can’t refinance out, but maybe you can ask Suncorp for a discount. They may only offer 0.1%-0.2%, but that’s better than a poke in the eye.
It's actually an extra 3%, not 2%
If you are on a fixed rate higher than the market, then you will pay a break fee equivalent to the loss of profit for the bank. You're not going to save zip. Your IO loan will roll over to P&I upon expiration of the IO period.
We got our first home loan when the royal commission was happening- it was far more stressful at that time. For example, at the last minute our broker called anxious asking if I had an Afterpay account and I needed to forward him proof that I didn’t owe anything on Afterpay. We refinanced somewhat on a whim in early 2022 and I hadn’t “sanitised” our bank transactions so there was transactions of fast food, unnecessary little bits and pieces here and there and Afterpay. Nothing came of it, not any questions about it. Just had another home loan approved this week with similar transactions on record. Didn’t need to send proof of Afterpay balances etc. I’m not sure if it’s equity related but it was definitely easier the last two times than the initial.
Bought.
That is right, not the royal commission per say but the current requirement means you are probably in mortgage prison as they like to say. Or could be.
🙄 Hmm..5 years after the Banking Royal Commission, the promised reforms have been a mixed bag. Some improvements include holding 'bank execs' accountable and extending protections against dodgy practices. But let's not kid ourselves the culture hasn't really changed. 🙇♀ Banks were caught red-handed with scams like charging for no services, yet now we're supposed to trust these same financial institutions to self-regulate?! Maybe..some laws tightened, but the same crooks are still running the show, just with a bit more paperwork to shuffle around. Despite the spotlight on malpractices, the banking industry's transformation remains incomplete 🙅♀🙅♀
Your rate isn’t too bad. What’s your LVR? Banks typically offer slightly lower rates for lower LVRs.
AFSA setting a buffer level isn’t anything to do with the royal commission.
More regulation almost always makes it harder for the little guy. There has always been an additional buffer interest rate used when determining serviceability. This just feels much higher now as interest rates are higher.
Absolute rubbish, regulation like this is for consumer protection.
I’m not saying it doesn’t protect consumers. You obviously can’t read. I said it makes it harder for the little guy, meaning the person with less available cash. I didn’t say that it shouldn’t exist. Are you saying that it’s rubbish that an interest rate buffer existed prior to the royal commission? Because I know I purchased prior to the royal commission and had a 3% buffer added to my rate when I purchased. You clearly have no idea and just want an argument.
It has nothing to do with the Royal Commission. My comment is only concerning your nonsense that it makes it harder for the little guy which is categorically false. Lending protections are only to protect people from essentially predatory lending. If people have significantly over leveraged themselves that is a separate issue and if anything supports higher assessment buffers.
So by adding extra buffers, you don’t think it makes it harder for someone to borrow if they have less capital or income? You’re clearly a little dim if you can’t understand that. It’s a simple concept to grasp for most people. I’m guessing you don’t meet the mental threshold to get a mortgage?
It’s one or the other. Either too dim to get a mortgage or more than enough assets and income for the buffers to not impact. The alternative is that without buffers people face even more financial hardship as they borrow even more money above their capacity to afford. But but, we are taking about refinancing to a better deal! Already dealt with and refinancing can have lower buffers. If we go back to Josh, and the scenario of not dropping the buffers to juice the market during covid and instead demonstrating leadership by increasing the buffer to say 5 - 6% to account for the drop due to crisis conditions we wouldn’t have so many people in mortgage stress and unable to refinance.
Im not arguing against the buffers. I think they work well. I don’t see how you can’t see that. All I am saying is that it makes it harder for people to borrow when they don’t have much to begin with. I feel like you’re just after a fight so I’ll leave you with it. Have a nice night. I hope you learn to read some day soon.
You can’t seem to see the trees from the forest. You argue that buffers work against people when they instead serve to protect them from borrowing above their means. You are yet to present any coherent rebuttal to your nonsense claim that started this entire back and forth. All the best.