As some of you are now aware there have been some big changes to investment lending over the past two weeks.
The Australian Prudential Regulation Authority (APRA) has been pressuring the banks into limiting their investment lending growth to 10% per year. With historically low interest rates and very strong property markets in Sydney and Melbourne some of the banks were closer to 30% growth in the past 12 months.
APRA’s advice to banks was to reduce investment lending growth as they may be hit with higher bank capitalisation requirements which adds to the cost of lending.
All of the banks have adhered to APRA’s request and over the past two weeks have made changes to investment loan interest rates, changed LVR limits for investment lending, changed what rental income they will use for servicing and also changed how they assess a client when buying or refinancing an investment.
Some banks have heavily reduced LVR lending for investment loans from 95% to 80% and most lenders have now added a margin/ higher rate for all new and existing investment loans which means some of you are receiving letters from the banks now advising of your new rate and repayment. Additionally some banks have stopped lending for investment all together.
So what does this mean for you?
- Your investment loan repayments may be going up in the next week or two
- Your ability to refinance your investment loan may now be limited
- Plans for any future investment lending will need to be carefully considered
- We may need to sit down with you and discuss if your current lender is still the most suitable for you.
- Your Mortgage Choice broker will be able to assist you in making an informed and planned decision on what your next steps are.
So what are WE doing about it?
- The changes are still occurring, so at the moment we are learning as much as we can so that when we do discuss these changes with you we will know what options you have.
- We have held a number of meetings with the banks over the past week to see who is still engaged in the investment lending space and who still wants to deal with our fantastic investment clients.
- Committing to you, our clients, that we will update you all as more information comes to hand.
These are some big changes for both you and us and the best action we can take is to understand where each bank stands so we can decide how best to advise you. We anticipate some more changes to take place over the next 12 -18 months and we want to assure you that we are on top of it and we are here to answer any questions you may have.
If you would like to have a chat with Tyson, Nathan or Jorrie please give us a call at the office on 9472 0211 and we will be happy to assist.