Banks continue to tighten the reins on investment lending

Investors have been dealt another blow by Australia’s lenders, with many banks raising their interest rates in recent days.

July 29, 2015

Investors have been dealt another blow by Australia's lenders, with many banks raising their interest rates in recent days.

Over the last week, many of Australia's lenders, including ANZ, CBA, NAB, Macquarie and AMP, have announced they will increase their interest rates on existing investor loans by up to 30 basis points.

Mortgage Choice CEO John Flavell said the hike in interest rate pricing for investors should not come as a surprise given that the Australian Prudential Regulation Authority has spent the last few months trying to crack down on the proportion of investor lending activity.  

“There are a couple of reasons for the price hikes. In the first instance, in December last year the Australian Prudential Regulation Authority (APRA) told Australia's lenders that they must limit their investment lending growth to 10% each year. As a result, a number of Australia's lenders have started to increase their investment lending loan pricing and introduced a range of policies (that predominately affect investors) to curb their investment lending growth,” Mr Flavell said.

“Furthermore, in recent weeks, APRA announced a change to the amount of capital the major banks must hold in order to manage the inherent risk in mortgage lending.  In order to recoup this cost, some of the major lenders have been forced to raise their interest rates. At present, the hikes have been limited to investment loans as this is one buyer group that many lenders are looking to limit their exposure to anyway.”

Mr Flavell said it was important to note that the changes being made, especially any rate increases, wouldn't just affect potential investors but existing investors as well.

“Those who financed their investment property purchase through CBA, NAB, ANZ, Macquarie or ANZ may see their interest rate rise over the coming weeks,” he/she said.

“For those customers who are concerned about how the changes may impact them, it may be wise to speak to a professional.

“At the end of the day, the changes being made are only being made by a handful of lenders and at Mortgage Choice, we have access to hundreds of home loan products from our panel of up to 25 lenders, so we are in the perfect position to help people understand the impacts of these changes and to determine if there is a better investment loan available to suit their needs.”

If you would like learn more about your home loan or financial advice options call 13 77 62.

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