As many investors will already know, banks have been steadily tightening their lending criteria, making it more challenging to borrow. And soon, when the new capital requirement rules for banks come into effect next year, this is only going to get harder.
Capital requirements for the major banks will be increased from 10% to 18% over the next seven years, meaning they will collectively need to raise and hold an extra $20 billion. That’s $20 billion less that they can lend to businesses and investors. The increased capital requirements are expected to result in a rise in interest rates of between 20–40 basis points (0.2%–0.4%).
So what does this mean for business owners and property investors?
To minimise the effect this will have on your ability to borrow money, you need to get your financial affairs in order. And you need to do this now, not later. We suggest the following strategy:
In summary, the new rules will make it harder for investors and businesses to borrow, but there are things you can do now to reduce the impact this will have on you. However, you’ll need to act fairly quickly. Contact your mortgage broker for more advice. (We recommend Kris Pedersen Mortgages - you can contact them here.)
I found Matthew Gilligan’s Property 101 and Tax Structures 101 to be superb books for the following reasons: 1. They contain a wealth of information about property investing and related tax matters; 2. The commentary is very rounded and balanced; 3. They are filled with financially savvy practical tips and red flag warnings; and 4. The relatively informal style, use of short case studies and anecdotes to illustrate points, and the clarity of presentation make the books very reader friendly. The above combine to make two books that are educational, thought provoking and inspiring. I only wish I had access to this information much earlier. - Geoff W - April 2016
Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.
We help new, small and medium property investors become long-term successful investors through our education programmes and property portfolio planning advice. With our deep knowledge and experience, we have assisted hundreds of clients build wealth through property investment.
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