1 00:00:00,160 --> 00:00:02,280 Speaker 1: Questions are smalling around the banks designed to get money 2 00:00:02,279 --> 00:00:04,760 Speaker 1: into the market. Despite the fact interest rates are falling, 3 00:00:04,800 --> 00:00:07,400 Speaker 1: some banks are still apparently stress testing at a shade 4 00:00:07,480 --> 00:00:10,600 Speaker 1: under nine percent now. A loan market mortgage advisor Bruce 5 00:00:10,600 --> 00:00:12,640 Speaker 1: Patten's with us on this. Bruce, very good morning to you. 6 00:00:13,720 --> 00:00:14,360 Speaker 2: Good morning Mike. 7 00:00:14,480 --> 00:00:17,160 Speaker 1: How wide spreads that at just under nine percent. 8 00:00:18,280 --> 00:00:21,000 Speaker 2: They're starting to drop just some of them are waiting 9 00:00:21,079 --> 00:00:23,759 Speaker 2: at the moment. I mean, you need to understand the 10 00:00:23,760 --> 00:00:26,439 Speaker 2: reason the banks introduced these test rates in the first 11 00:00:26,440 --> 00:00:28,560 Speaker 2: place was to try to prove to the Reserve Bank 12 00:00:28,600 --> 00:00:31,479 Speaker 2: that they didn't need to introduce DTIs, And now that 13 00:00:31,520 --> 00:00:35,199 Speaker 2: they have, the banks really could review some of this exactly. 14 00:00:35,720 --> 00:00:37,519 Speaker 1: I see, I'm getting a mixed message. I thought the 15 00:00:37,520 --> 00:00:39,640 Speaker 1: banks were into getting money into the market. Hence you 16 00:00:39,680 --> 00:00:42,000 Speaker 1: had a bit of competition and the interest rates were falling. 17 00:00:42,520 --> 00:00:44,639 Speaker 1: And if that's the case, how then do you want 18 00:00:44,680 --> 00:00:48,239 Speaker 1: to Is it just safety or they being overly cautious. 19 00:00:48,960 --> 00:00:52,000 Speaker 2: Well, I think they've been overly cautious at the moment, 20 00:00:52,120 --> 00:00:54,680 Speaker 2: but with the cost of living being so high, they're 21 00:00:54,720 --> 00:00:58,080 Speaker 2: just really conscious that it's e's extremely expensive for people 22 00:00:58,280 --> 00:01:01,520 Speaker 2: all around. It isn't just about mortgage anymore. Everything is 23 00:01:01,560 --> 00:01:04,440 Speaker 2: costing more insurances. You know, you've seen it all. So 24 00:01:04,560 --> 00:01:07,280 Speaker 2: until those inflation rates get back to normal, I think 25 00:01:07,319 --> 00:01:10,800 Speaker 2: they're just going to be cautious. They're trying to act 26 00:01:10,880 --> 00:01:14,319 Speaker 2: below the dtiyes. So at the moment you can't actually 27 00:01:14,319 --> 00:01:16,240 Speaker 2: even get to the level that the Reserve Bank is 28 00:01:16,319 --> 00:01:19,720 Speaker 2: set with like a six times income. You can get 29 00:01:19,720 --> 00:01:21,520 Speaker 2: that high with the test right. So I think it'll 30 00:01:21,560 --> 00:01:23,839 Speaker 2: balance out as we see these interest rates start to drop. 31 00:01:23,840 --> 00:01:26,640 Speaker 2: And I think tomorrow's announcement will be very key in 32 00:01:26,680 --> 00:01:28,520 Speaker 2: seeing some of those test rates come. Well. 33 00:01:28,720 --> 00:01:30,840 Speaker 1: I was going to say, if they go fifty points, 34 00:01:30,920 --> 00:01:34,000 Speaker 1: I mean you can't possibly still stress test just underlying, 35 00:01:34,080 --> 00:01:34,360 Speaker 1: can you. 36 00:01:35,400 --> 00:01:38,399 Speaker 2: That's right? So I think you'll see a big move 37 00:01:38,640 --> 00:01:42,000 Speaker 2: once the Reserve Bank signals its intentions. And you know, 38 00:01:42,040 --> 00:01:44,280 Speaker 2: if they don't go fifty, I think they'll be they'll 39 00:01:44,319 --> 00:01:45,840 Speaker 2: be a bit of anarchy out there about it. 40 00:01:46,000 --> 00:01:48,600 Speaker 1: Well, I reckon, and what's the demand for money? Like, 41 00:01:48,720 --> 00:01:51,120 Speaker 1: did the first move make a material difference in your 42 00:01:51,200 --> 00:01:51,600 Speaker 1: view or not? 43 00:01:53,240 --> 00:01:55,400 Speaker 2: Absolutely? And we've seen it and you've talked about it 44 00:01:55,480 --> 00:01:59,800 Speaker 2: this morning. Already open homes are busier. There's definitely a 45 00:01:59,800 --> 00:02:01,840 Speaker 2: bit there feeling out there, so there's more people out 46 00:02:01,880 --> 00:02:04,680 Speaker 2: and about, so it's all going to flow through, and 47 00:02:05,240 --> 00:02:07,800 Speaker 2: it's just really a timing thing about how how long 48 00:02:07,840 --> 00:02:09,880 Speaker 2: it'll be before they bring these down. They're not that 49 00:02:09,960 --> 00:02:11,720 Speaker 2: far away. You can borrow about five and a half 50 00:02:11,720 --> 00:02:14,760 Speaker 2: times your income on average at the moment. It's going 51 00:02:14,840 --> 00:02:17,520 Speaker 2: to stop at six, so the test rates become irrelevant 52 00:02:17,520 --> 00:02:20,079 Speaker 2: once the interest rates drop. Anyway, Yeah, exactly. 53 00:02:20,440 --> 00:02:22,079 Speaker 1: With all the rules that we've got, you d to guys, 54 00:02:22,200 --> 00:02:25,080 Speaker 1: I mean, are they working. I mean, I've forgotten what 55 00:02:25,080 --> 00:02:26,800 Speaker 1: they were trying to achieve at the end of the day, 56 00:02:26,919 --> 00:02:28,720 Speaker 1: so many bloody rules to go through now, I mean, 57 00:02:29,120 --> 00:02:30,480 Speaker 1: is it all sort of working? 58 00:02:31,639 --> 00:02:34,919 Speaker 2: I think so. I think the fact is the DTOs 59 00:02:34,919 --> 00:02:37,360 Speaker 2: are a very blunt instrument, and they're probably not the 60 00:02:37,400 --> 00:02:39,600 Speaker 2: way we should have gone. But it was a reaction 61 00:02:39,720 --> 00:02:41,760 Speaker 2: to the fact that the reserve bank rates get to 62 00:02:41,760 --> 00:02:44,200 Speaker 2: two percent if people could borrow ten times their income, 63 00:02:44,480 --> 00:02:47,360 Speaker 2: and it's their reaction to that to say, gif rates 64 00:02:47,400 --> 00:02:50,200 Speaker 2: get down again, to say four four and a half 65 00:02:50,280 --> 00:02:51,840 Speaker 2: if we were lucky enough to sit them there. I 66 00:02:51,840 --> 00:02:54,080 Speaker 2: don't think we will, But if we were, and you 67 00:02:54,120 --> 00:02:57,760 Speaker 2: could still borrow eight times your income. Then that's a problem. 68 00:02:57,919 --> 00:03:00,760 Speaker 2: So it's a reaction to something that's in the past. 69 00:03:00,800 --> 00:03:02,440 Speaker 2: They could have fixed it long ago. They had the 70 00:03:02,480 --> 00:03:05,000 Speaker 2: ability to do t DTIs when ranked for that loan, 71 00:03:05,040 --> 00:03:05,800 Speaker 2: and they chose not to. 72 00:03:06,120 --> 00:03:09,000 Speaker 1: That's almost as though Adrian cocked it up. Bruce appreciated. 73 00:03:09,040 --> 00:03:11,480 Speaker 1: Bruce Patton, who's the loan market mortgage advisor, with us 74 00:03:11,480 --> 00:03:11,959 Speaker 1: this morning. 75 00:03:12,440 --> 00:03:15,360 Speaker 2: For more from the Mic Asking Breakfast, listen live to 76 00:03:15,480 --> 00:03:18,520 Speaker 2: news talks it'd be from six am weekdays, or follow 77 00:03:18,560 --> 00:03:20,160 Speaker 2: the podcast on iHeartRadio.