What does this mean for the property investor looking to expand their investment property. The LIBOR (London Inter-Bank Offered Rate) has double during the past 12 months indicating banks have become more cautious in lending to each other. Its likely major ratings downgrades by Moody's will further divide the world's biggest banks based on their strength and access to cheap customer deposits.
But has the downgrade given an advantage to the “safe haven” banks that look to fund their business activities with stable and low cost customer deposits? Other banks may find a worsening market who rely more on capital markets for their funding. With families thought to be currently saving about 9 per cent of their income, some Australian banks may begin to have a competitive advantage.
However, the stock and credit markets showed little reaction as the cuts have been expected, in fact its thought they could have been worse. Moody's gave the highest ratings to HSBC, Royal Bank of Canada and JPMorgan, which it said had stronger "shock absorbers." Moody’s noted, Morgan Stanley and others with few retail deposits and banks including Bank of America, Citigroup and Royal Bank of Scotland, that despite having big deposit bases have combined their retail business with riskier investment banking.
For the rental property investor looking to purchase a new property or refinance their investment property it should make sense to use a mortgage broker, who normally does not charge for their services and has access to many banks and products to find a loan suitable for their clients circumstances. Try our colleagues who link to MyProp Finance and see if they can assist you.
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