There's been a bit in the news lately that the Australian Prudential Regulation Authority (APRA) has issued guidelines resulting in changes to mortgage lending policy.
What does this mean for you? Well basically, Government Regulators including the RBA have expressed concerns about a potentially overheated property market, especially in Sydney and Melbourne. APRA would like to take the heat out of the market by slowing the growth of mortgage investment lending. APRA has issued guidelines to financial institutions designed to do that and ensure the ongoing strength of the the Australian banking system. The main change that APRA has asked of the banks is to cap investment loan growth at 10% p.a.
A number of lenders are already above this limit, so they are under pressure to significantly reduce their investment lending. The four major banks and Macquarie Bank are also required to increase the capital they hold against mortgages, which tends to increase the cost of lending. This is why the banks have already passed on some of these costs to customers via higher interest rates for investment loans.
If you live in your home and only have an owner occupied mortgage, you may not be affected by these changes. In fact some lenders have even decreased interest rates on owner occupied loans.
If you have an investment, or an ‘interest only’ home loan, you may have found that your lender has increased the interest rate on that loan. If you are looking at buying an investment property, you may find the lending market a little more restrictive than in the past. This doesn’t mean you won’t be able to find a loan that suits you, there may just be a few more hurdles to jump.
That’s where I can help you!