All signs are pointing to credit tightening.  

You might have seen the article in Friday’s The Australian, where the Reserve Bank Australia warned that “falling house prices and tightening lending standards could lessen the availability of home loans” (The Australian, 5th May 2018), whilst on the same day, the Financial Review hit out with “House prices ‘belted’ as banks hit skids” (Australian Financial Review, 5th May 2018).

There’s no doubt some attention-grabbing journalism going on in these articles, but… 

The Royal Commission is in full swing. The effect on the banks is not just scaremongering – down in the trenches, we’re very much seeing significant tightening by the banks, both in commercial lending as well as in home lending. It’s a change that is likely to impact on anyone applying for a loan over the coming months and years, including high income earners.  

We’ve been watching this unfold for the last couple of months and, forgive me for sounding pessimistic, but the pull-back by the banks honestly feels not that far removed from 2008/09. No, not to the extent of calling in performing loans or running out of capital, but there is a very noticeable capital supply restriction starting to take place – this time it’s not the market driving it, but the regulator.    

In the commercial lending space, we’re increasingly seeing business owners and property developers/investors that have never had any issues getting bank funding, coming to us saying that they are finding it incredibly frustrating trying to get the funding that they want or need.

With home lending, whilst we’re the first to say that applying for a home loan has become somewhat of an administrative nightmare, having to go to the nth degree to prove incomes and living expenses, the banks really do want to write home loans (they are after all typically some of their most profitable loans) – but now more than ever, they need to satisfy the regulator on every little detail.

While every one of our clients’ financial positions is different, we’re glad to say that we have been successful in being able to get funding approved even in challenging circumstances. It’s not necessarily easy and doesn’t necessarily happen overnight, nor does a funding package necessarily look exactly like what you would have expected 1 or 2 years ago, but the wheels are still turning. 

What’s our secret to getting deals done?

We regularly tell people that we do things differently to finance brokers. We worked in banking for a large chunk of our careers (which might explain the grey hairs coming through!), so we have an in-depth understanding of how the banks and the system works. When we started STAC Capital, we could see a clear gap in the market for advice from professionals who have this understanding and experience. Rather than just trying to find the first deal we can find, we take the time to understand and analyse our clients’ business or project, which ensures that we completely understand what can be achieved, which lenders are most likely to come on board, before presenting a detailed proposal and negotiating a funding structure or package.  Yes, it takes a bit more time, but in our experience, it makes all the difference to the outcome.

That and our good looks (just seeing whether you’re still awake!).

If you’re interested in understanding how the tightening lending standards might affect you, get in touch. We’d love to get to you more about your challenges and opportunities, and how we can help you achieve your goals.

Mark Trayner