Why it’s so important to review your investment loans now!

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.

Client Example:

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

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