What changes have Australia’s lenders made to their suite of investment products?
These changes include (but are not limited to):
- The removal of discretionary pricing. This means investors no longer receive further discounts off the advertised interest rate.
- Interest rate increases. Over the last few months, many of Australia’s lenders have increased the interest rates across their suite of investment and interest only home loan products, making the cost of borrowing more expensive for potential investors.
- The removal of foreign income for servicing. Those who earn an overseas income (i.e. they may receive rent from a property they own in another country) can no longer use this income when trying to prove they can service their home loan. Today, many lenders will look only at the income a borrower earns within Australia when establishing home loan serviceability.
- A reduction in the proportion of rental and other investment income for loan servicing. Lenders have reduced the amount of ‘rental income’ they will accept when establishing whether a borrower can service their home loan. In other words, some lenders who were previously happy to use 100% of the rental income a potential borrower received when establishing home loan serviceability, will now use a smaller percentage of the rental income.
- A reduction in maximum loan to value ratio (LVRs) for investors. Many lenders will no longer lend above 80% LVR to investors. This means many property investors may have to increase the size of their deposit or look for a lower value property.
To find out what the specific changes are for a specific lender, it’s important to seek professional mortgage advice.