Current as of August 2015
Over the past 2 months, Australia’s largest banks have all tightened up on loans to investors. This is off the back of APRA’s (Australian Prudential Regulatory Authority) restrictions on the major banks to limit their lending to property investors (as opposed to owner occupiers) at 10% growth per annum – they have been growing more than this.
Banks have reacted differently to this lending cap to deter growth in new investment loans, by implementing tougher lending criteria. This includes:
1. Reduced lending ratios for investors (some have limited to max 80%)
2. Higher rates of interest for new and existing investment loans (whilst keeping owner occupied loans at a lower level)
3. Notionally reducing the annual rental income on investments
4. Higher servicing assessment rates
5. Discounting negative gearing benefits in their servicing calculators.
These changes are just a number of ways that the banks can reduce their exposure to investors.
The most interesting change is the price differentiation between owner occupied loans and investment loans, even for existing investors. For those of you old enough to remember, this used to be the case in days gone by – you would pay a premium for investment loans.
Banks (depending on their systems) have handled this differently, from implementing a rate increase for investor loans only, to others increasing rates on all interest only loans – which has impacted some owner occupiers. You may or may not have already received notification from your bank of changes to your existing loans.
What does this mean to the average investor? Now is the time to review your loans and see how your particular lender has affected you. You may then need to test the market as to whether you can negotiate a better deal based on what deals are available.
Article written by our Mortgage specialist – Domenic Corigliano of Mortgagelink – recent winners of the ‘Broker of the Year’ at the 2015 Australian Broking Awards.
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