• How will investment loan policy changes affect you?

    June 20, 2015
  • Property Investors: How will lender policy changes affect you?

    If you’re looking to invest in property, then APRA’s campaign to rein in the investor sector may impact you. Mortgage business newsletter www.mortgagebusiness.com.au summarised their reasoning as follows:

    Lenders changes to Investment Property Loans

    “In recent weeks, Australian banks have started tightening investment lending to comply with expectations set by APRA. These expectations aim to ensure sustainable growth in the home loan investment sector to protect both investors and the home loan market.
    APRA’s campaign against investor lending started last December when it told banks that it would take steps to reinforce sound mortgage lending practices.
    Since then it has gradually increased pressure on lenders, including in a recent speech by chairman Wayne Byres, who issued a warning about “heightened” mortgage risks.

    The regulator said in December that one of its “specific areas of prudential concern” was lenders growing their investor portfolios by more than 10 per cent per annum.
    APRA said that the 10 per cent benchmark was not a hard limit, but a key risk indicator based on income growth and market trends.
    According to APRA’s latest monthly banking statistics, for March, nine lenders that service the third-party channel had investor growth above 10 per cent.”

    An example of changes already implemented by different lenders include:

    • Higher discounts offered for owner occupied home loans
    • Reduction in discounts for investment loans
    • Larger deposits – 80% LVR for investment loans
    • Higher affordability rates used when assessing serviceability
    • Tougher criteria around external debt servicing
    • Removal of negative gearing benefits
    • Exiting SMSF lending market for residential properties

    Not all lenders are making these changes so it’s more important than ever to speak with an experienced mortgage broker who understands your personal circumstances and how they fit with different lender policies.

    To find out more about changes to investment lending and how this may affect you, speak to us at Australian Financial Innovations.

    Australian Financial Innovations, helping you through the finance maze