Is the storm about to hit?

For some time, the government has been making noises about reining in residential property lending. A letter we received from one of the major banks this week may signal the tipping point.

This letter confirmed ‘Triple CFA’ changes that will apply from 1 October 2021. There’s a lot of technical detail, but the gist is that borrowers will find their ability to get loans even more circumscribed.

The measures are clearly intended to target property investors but they will apply to everyone. Banks will be running the ruler over all your spending before they approve any new mortgages – or even changes to your existing loans. Do not assume your next loan top-up will be waved through.

How intrusive are these checks? We’re talking detailed scrutiny of your household spending, including groceries and meat. Your spending on haircuts and dentistry will be examined.

This is now easier for banks as we’ve all got used to running these expenses through credit and debit cards. Those of you who want to get rid of cash might have a second thought about that.

Ever the optimists, we see an opportunity here. Why not use this lockdown time to create some better financial habits? 

One smart idea is to have separate accounts, so your spending and savings are allocated up front before the money trickles away. You’ll need an emergency fund to cover a few months of expenses, accounts for your car, future travel, household maintenance, insurance, and so on. These baby steps can make a huge difference to your future. They’ll also put the power back in your hands the next time you apply for a loan and the bank wants to see you’re a solid citizen.

If you want to get serious about managing your finances, while still enjoying the good things in life, we’re here for you. I’m more than happy to have a one-on-one Zoom session to help you get these things sorted.