Over the past week there have been some bold moves by the major 4 and second tier banks to curtail their investment loan book growth to 10% p.a.. This is in line with APRAs guidelines and recommendations issued back in December 2014 (refer attached) and in addition to the regulator increasing capital adequacy requirements for residential mortgage exposures. After some mild reaction in recent months, there has been some drastic changes over the past week including;-
AMP Bank yesterday announced it will not consider loans for investors effective immediately, including applications in progress. From 7th September they will increase their variable home loan rates for investment purposes by 0.47% p.a., up to 4.97% p.a..
CBA, ANZ and Macquarie Bank will increase variable home loan rates for investment purposes by 27 basis points from 10th August. This applies to existing and new loans.
Westpac and Bank of Melbourne maximum LVRs for SMSF loans reduced to 70% and investment loans 80%.
This essentially means it will be more expensive for investors to borrow money, notwithstanding changes to loan assessment policy for investors which has tightened considerably. Examples of this include some banks including only 70% of rental income for loan servicing purposes and raising their floor rates for loan servicing assessment. In some cases the floor rates have increased considerably, one specific example is a loan I brokered 2 months ago with an assessment rate of 5.6% p.a.; if I brokered this loan today the rate would be 7.25% p.a., and the loan would not have progressed.
Time will only tell what impact this has on the current bullish property market. Will investors pull out of the market as the cost of borrowing becomes more expensive and pave the way for those looking to buy their first home?
The next few months will provide some interesting data on where the property market is heading, watch this space.
Lending & Finance, Paris Financial