ADELAIDE BANK
BANK INVESTMENT LENDER OF THE YEAR
While most of the stellar property price growth has been driven by owner-occupiers, investors are returning to the market too.
In March, investment loan commitments grew by 12.7%.
And it’s easy to see why. Home values in the five big capital cities increased by 10% between January and May, according to CoreLogic.
Still, investment loans represented only 25.9% of the value of new mortgage commitments in March, below the decade average and the historical highs recorded in 2015.
“Although the share of investor lending staged a temporary bounce-back in 2016, investor activity turned due to a second round of credit tightening in 2017, which focused on reducing interest only lending,” says Tim Lawless, CoreLogic’s head of research.
“Coupled with a more cautious lending environment during and after the financial royal commission, the share of investors in the market trended consistently lower until February this year.”
Adelaide Bank has won this year’s award. Its SmartFit product offers a 2.79%pa variable rate for principal and interest loans, provided that the loan-to-value ratio (LVR) is 80% or lower. A three-year fixed rate SmartFit loan can be had for 2.55%pa.
“We have made huge strides over the last two years, further extending our reach into the third-party market through our valued partners, investing in capability and reducing complexity for our partners and their customers, and telling our story,” says Marnie Baker, managing director of Bendigo and Adelaide Bank.
As with most other financial products, the industry is going through disruption to make the customer experience faster and easier.
“The market has seen significant shifts in terms of technological innovations such as digital documentation and identification by video, as well as adjustments to the way full valuations are undertaken,” says Baker.
“The response of the entire industry to the large number of customers in need of assistance, through no fault of their own, was a standout, along with a number of changes we quickly implemented to support our customers.”
Baker says the key lies in responsive, simple products with competitive rates.
“Our strategy is to keep our products relatively simple and easy to understand. We believe our 100% fixed-rate offset products remain a market leader, preferred by a large proportion of our customer base.
“We have focused on simplifying our offering in recent years to focus on what we believe matters most to consumers, being competitive rates and turnaround times to support the underlying product offering.”
Second place this year goes to HSBC, which offers principal and interest investment loans with a 2.90% two-year fixed rate.
Third is Macquarie Bank, which offers investors a three-year fixed rate loan at a low 2.39%pa, while a variable rate of 2.49%pa applies on loans with an LVR of 60% or lower.
It’s easy to think only of the big four banks when it comes to investment lending, yet non-banks can often lend at higher risk and at a more competitive rate due to their access to wholesale funding.
Freedom Lend stands on the top step of the podium in our inaugural award. It ranked top in five-year fixed-term home loans, with rates starting at 2.57%pa, while its variable investment loans start at 2.47%pa.
“Freedom Lend has always put customers’ objectives at the forefront,” says Freedom director Mark Huynh. “We provide leading rates combined with great service in order to simplify the decision-making process. We continue to build our products, expanding to different areas and keeping price a main driver of our offer.”
For example, Freedom Lend has recently introduced self-managed super fund loans as well as overseas lending.
“This allows us to provide more to existing customers and to capture more tailored marketplaces while keeping our core model,” says Huynh.
Investment lending has been going through significant change since the 2008 GFC to the more recent pandemic response, with lenders making adjustments to meet the new conditions.
“Coming out of 2008, lending risk was reduced and products such as no-doc loans were being phased out by lenders,” says Huynh. “In addition, low-doc loans and non-conforming loans had seen a marked reduction. By 2015 regulations had introduced stricter requirements for investment home loans as well as purchases from foreign investors.”
And that was before the economic disruption wreaked by the coronavirus pandemic. “Coming out of Covid-19 we are seeing a strong move for lenders to provide competitive fixed-rate home loans,” says Huynh.
Last year, the federal government pushed banks and lenders to assist in cases of hardship resulting from customers’ inability to keep up repayments.
“This move in the market allows for borrowers to obtain certainty with their repayments as well as rock-bottom prices.”
With changes coming to simplify the lending process, Huynh expects to see a greater uptake in the home loan area.
“The treasurer, Josh Frydenberg, has emphasised the importance of easier access to credit for our recovery from Covid-19. Such a change will allow for more competition within the market and a better outcome for borrowers.” Second placegetter Resi impressed with its variable investment home loans starting at 2.79%pa, while Yellow Brick Road, in third place, is offering variable loans with interest rates starting below 3%pa.