Over the last week, a couple of Australia's major lenders have increased the interest rate pricing on their investment loans.
Well, there are a couple of reasons for the price hikes. In the first instance, in December last year the Australian Prudential Regulation Authority 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.
Secondly, in recent weeks, the Australian prudential regulation authority announced that lenders using advanced internal ratings based models to determine credit risk will have to increase the average risk weight on mortgages from approximately 16% to 25%.
This change predominately affects the major lenders including CBA, Westpac, NAB, ANZ and Macquarie. A 25% mortgage risk weight would increase the majors' capital requirements by approximately $12.5 billion. In order to recoup this cost, 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.
It is important to note that the majority of changes being made are only being made by a handful of the bigger lenders. 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 our customers find the right loan for their needs at the best price and ultimately help our customers achieve their financial goals - whether that be buying a home or an investment property.