John Symond the Executive Chairman of Aussie Home Loans talks about the interest rate decision handed down by the RBA
John Symond on interest rates
Ross: The Reserve Bank as I say, they believe in interest rate on how John Symond is the Executive chairman and the founder of the Aussie Home Loans Group is on the line right now. Hello John, how are you going? No surprise see, but there will be little more up about the Australian economy?
John Symond: No surprises at all, and steady as she goes with a little bit of optimism as you say.
Ross: Okay. In regards to that optimism that’s coming, quite clearly there is something of a two-stage thing going on here. Reserve Bank optimistic keeping in two-straights on hold, but bank’s starting to push up into straight in particular on interest-only and also on the investment line. That’s something I’ll talk with Shayne Elliott from the ANZ in about a little later on. What’s your own take on what’s taking place here?
John Symond: Well as far as the fixed interest rates going up, but that a symptom of the cost of funds, particularly off-shore funds. But in terms of increasing rates of interest-only in for investors, this falls into line with what the regulators want to see. They want to put the breaks on. One way putting the breaks on is jacking up interest rates that always creates hesitation and that’s what’s happening.
Of course, the banks will right this business as a result of that. That, people who’ve already got the fixed interest rate, they might be impacted because their interest rate is fixed. That, certainly people wanting to go into a new fixed rate, will look at slightly increased rates
Ross: I noticed a few articles earlier this week in regards to mortgage brokers, you and Aussie of course are largest mortgage brokers or some of the largest mortgage brokers in this country. Just explain what the clamp down has meant for mortgage brokers and the business that they’re doing. Is it more difficult now to be able to get some same sort of deals across the line that maybe six months ago you ever get in the way?
John: Much more difficult, Ross. Regulators have introduced basically new lending rules to lending guidelines, the amount of interest starting lines that has had to be kept right back. We’re telling customers that they don’t qualify for — some customers won’t qualified, whereas previously they would have.
There’s a lot of, I guess, scare talk about the property price is too high, it might cause a bubble, etcetera, etcetera, government regulators making it tougher. A whole host of reasons has caused a lot of concern with buyers. We’ve seen volumes lending drop by probably 20% over the last three or four months. Brokers and banks, all lenders our feeling the volumes having started to dry up. [crosstalk]
Interest Only Loans
Ross: Okay. Those effective brokers were selling interest-only loans or recommending interest-only loans to many people. Couldn’t there been an argument that some of those loans were maybe inappropriate or not suitable for those prospective borrowers? Is that one of the issues that the authorities are trying to clamp down on? Because quite clearly the rate payments are less on an interest-only loan when you start to make those monthly rate payments. Is it a situation that people are trying to afford more expensive properties by using those cheaper monthly payments?
John: Ross, I agree with that. I think clearly real estate agents and banks in particular were keen for the good borrowers to borrow money. And particularly, when there was a rush to grow lending books, I think the banks, it was discovered that over 50%, which all of us are horrified, 50% of owner-occupiers were taking out interest-only loans.
Now, why in the hell will you do that? “Stay away from interest-only loans from Mom and Dad. They’ve got to pay their loans off. If you’re taking interest-only loan like a credit card, you never pay it off.” When you say the brokers’ doing it, let me tell you, it was right throughout the industry, and I’m pleased that Aussie wasn’t playing in that game. Because I’ve always been against interest-only loans for legitimate home-owners and I’m against people borrowing a lot or close to, and not having a decent enough deposit.
Ross: Okay. Just a final one, and on Seven News tonight. Big revelations, I probably heard the story. What was the story? What were you telling Seven News tonight?
John: They just interviewed me about the story about the economy. I ended up complaining like most Australians that our politicians aren’t governing, and I’m talking about all parties here. I’m not saying really here whether it is Liberal, Labor, whatever. I’m saying, we’ve got serious problems. You and I have discussed the broken tax system for 20 or 30 years. What’s been done about it. GST doesn’t work. We don’t have 10% GST.
We’ve really got probably 8% because health, education, food’s not included. I gave a swipe at politicians not governing for the interest of Australians because good policies put up by one party. In most cases, it’s moved down and stole by the other parties. People have got a gut full of nothing happening. We’re seeing this now globally this is one of the reasons why Donald Trump got voted in.
Ross: It’s always good to have you in the program. John Symond, the Executive chairman and the founder of the Aussie Home Loans Group.
John: Thank you, Ross.