What's happening in the home loan market?
Lending for investment property purchases has grown by 21% year on year which is well above banking regulator APRA's speed limit of 10% growth*. To slow the growth in investment lending APRA may enforce 'speeding fines', in the form of additional capital adequacy requirements, if the lender exceeds the 10% growth benchmark. This intervention has caused many lenders to re-think how they approach lending for investment purposes.
How have the lenders reacted?
APRA’s intervention has led to some changes in the way lenders are assessing Home Loans for investment purposes.
Some of the measures introduced include:
- Tightening of loan servicing assessment criteria including the removal of negative gearing benefits from income calculations and increased assessment rates. (Assessment rates are the interest rate that the lender asses the borrowers capacity to repay the loan, it is over and above the rate that actual rate that the borrower will pay today to take into account future movements in interest rates.)
- Lower Loan to Value Ratio’s (LVR) with some lenders now refusing to accept applications for loans where the LVR is over 80% and some products even requiring a 70% LVR for investment purposes.
- No discounts available on advertised interest rates on investment loans.
What does this mean to anyone looking to invest?
All the changes have created some angst, with borrowers being turned away from their bank scratching their heads.
Now more than ever, anyone looking to invest should speak to a mortgage broker. With up to 28 lenders Mortgage Choice Chatswood can compare policies and serviceability criteria to find lenders to support the borrower’s needs.
Talk to us today to find the right lender to support your goals.
*Investor home loans tighten as regulator APRA clamps down - ABC news (Stephen Letts)