APRA’s reinforcement of prudential lending practices commenced in December 2014 – when the regulator first introduced a 10% cap on investment lending growth for Australian Deposit Taking Institutions (ADTI).
Since March 2017 – and coinciding with further restrictions imposed by the prudential regulator to cap interest only repayment types to 30% of “new” lending – the investment lending segment has changed significantly.
Some keys points to note:
- Over the past 12 months Investors have shied away from the major banks looking for more competitive alternatives, being those institutions not heavily impacted by the regulators supervisory measures.
- April 2017 saw ADTI’s heavily affected significantly increase standard variable interest rates AND heavily reduced discounting rates for investment loans with interest only repayment types to meet regulatory measures.
- Resulting from the above points and in conjunction with tightening investment lending policies – investment lending has significantly slowed since June 2017.
So what does all this mean?
The key here is those institutions which applied interest rate increases to their existing loan books – in some instances adding margins of up to 1.20% p.a. – are now offering significantly cheaper deals for “new” bank business.
In January 2018, we assisted a Paris Financial client who refinanced their $870K investment loan.
- Existing Bank – interest rate 5.06% p.a.
- Paris Financial sourced Bank – interest rate 4.09% p.a.
This is an outstanding result for our client, the expected annual interest savings to our client is $8,439 approx. in the first year!
Call our team today on 8393 1000 for a no obligation review of your existing lending.
Linda Hamilton, Lending & Finance Partner, Paris Financial