By Monica van Riet, Mortgage Choice South Melbourne.
You may have noticed recently APRA (Australian Macro Prudential Regulation Authority) have issued stricter lending guidelines to Australian lending institutions, to assist in slowing growth in the property market.
The main changes are as follows:
- Maximum LVR (loan to value ratio) allowance for investment purchases is a maximum of 80% of the purchase price with a number of lenders now. Therefore you must have a 20% deposit plus purchase costs for an investment property purchase. Not all banks have passed this restriction on as yet, however expect more changes to filter through imminently.
- Some banks are no longer offering special discounted interest rates over and above the normal rates for investment lending. They will only offer special discounted rates on Owner Occupied loans.
- After the recent interest rate cuts from the RBA in February and May, some lenders have not actually reduced their calculation for your borrowing capacity in line with the rate cuts. Some have even increased their buffer zone. Which means you may not be able to borrow as much as you could in previous months.
These are the main changes that have started filtering through over the past 4 weeks. We cannot be sure if the above changes will have any impact in slowing property prices, I suspect it will take a good 3-6 months before we can ascertain this.
If you are considering buying an investment or owner occupier property in the next few months, my tip is to ensure you have as much deposit as possible, and reduce all other liabilities such as credit cards and personal loans. Changing jobs and having only short term in employment may also affect your ability to obtain a loan.
For any comments, queries or concerns, please call Monica van Riet on 03 9681 8182 or 0401 677 314. You can email at firstname.lastname@example.org or visit us at Level 1, 147 Cecil Street, South Melbourne, VIC.