March 30, 2017
Melbourne's property market has seen dramatic growth over the past 24 months. While most property owners welcome this news, the government is concerned about the increasing difficulty for first home buyers to enter the market.
In an attempt to take the heat out of the market, APRA (the Australian Prudential Regulation Authority), has decided to target investors.
APRA's objective is to discourage or slow investors from buying property. They have done this by putting pressure on lenders to limit their growth in investment lending.
In answer to APRA's concerns lenders have decided, rightly or wrongly, to increase rates on investment loans and decrease borrowing capacity for anyone seeking investment finance.
There is also increased concern around Interest Only loans. APRA is worried that a growing number of Owner Occupied loans are Interest Only, which means mortgage holders aren't actually paying down their loans.
In the end, this means higher interest rates for Investors and those with Interest Only loans.
Each bank has acted separately, pricing these two perceived risks in different ways. Some banks have also taken this opportunity to increase rates for Owner Occupied loans, a decision only their shareholders will applaud.
The chart below shows the change in interest rates for our most popular lenders.
I recommend every mortgage holder should contact Mortgage Choice in Berwick to complete an Annual Review and discuss how these rate increases will impact them and what we can do to help.
Key: OO = Owner Occupied Loans INV = Investment Loans P/I = Principal and Interest Repayments I/O = Interest Only Repayments