Morning Briefing: Commonwealth Bank tightens leash on developers

CBA tightens lending for apartment developers 
Commonwealth Bank of Australia has tightened its lending to apartment developers because new capital requirements, and particularly the restrictions on lending to investors, increase the settlement risk at the end of the project, according to an article in the Australian Financial Review.

The Australian Financial Review has learnt that over 10 finance negotiations between CBA and apartment developers have fallen over at very late stages in the process because CBA has changed its lending terms and required a higher level of loan coverage. CBA neither confirmed nor denied the move.

"We have been growing our business in this market and in line with our usual business practice for all market segments, we regularly review our risk policy settings," a CBA spokesman said.

"Commonwealth Bank assesses each development on its own merits in determining presales requirements which will vary from project to project. It is business as usual for Commonwealth Bank on property development financing.”

National developers such as David Devine's Metro Property Development are seeing the tighter lending conditions from the big banks, saying "The banks are tightening up their lending because they feel the market might be heating up,” in article with the Financial Review.

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Banking regulators competing with local mortgage market
With Australian banks now under pressure to rein in lending to investors in the residential property market, mortgage experts believe that competition for owner-occupier loans is set to intensify, according to an article in the New Daily.

Big banks such as Westpac and ANZ have relied heavily on investment borrowers to build their mortgage businesses in recent years, but recent changes to prudential rules by the Australian Prudential Regulation Authority are forcing them to restructure their home lending strategies.

Almost half of Westpac’s mortgage business is exposed to investment borrowers, according to the New Daily report. While the mortgage rates of the major banks, including Westpac, are lagging way behind many non-bank lenders, they are adding other incentives to lure new entrants to the housing market.

On Tuesday, Westpac also began offering a $2000 cash-back on most owner-occupier loans. And rates on loans fixed for one, two, three and four years have been reduced by up to 0.3 per cent. These incentives apply to both first homebuyers and existing borrowers looking to refinance.

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Franchise owned by Australian mortgage company faces troubles
Seven former Mike Pero Mortgages' franchisees have taken High Court action over restraint-of-trade obligations that stop them competing with the brokerage business for two years.

The company is owned by Australia's Liberty Financial, and has 36 franchisees around this country. While it bears the name of its founder, Mike Pero, he no longer has any part in the business.

The former franchisees of New Zealand's largest chain of mortgage brokers are seeking a declaration that the restraint-of-trade terms they signed up to can't be enforced. Pero, franchisor of the mortgage business, has since got interim court orders against the seven franchisees preventing them competing with the firm as mortgage brokers. 

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