Banks tighten the reins on investment lending

THE investment lending space has become increasingly complex in the past month, with lenders adjusting their pricing and policies.

Despite the increased complexity, there are still plenty of lenders who are more than willing to lend on investment purchases, says Mortgage Choice.

A mortgage broker will have access to hundreds of home loan products and can help you find the lender and loan that is best suited to your needs.

But before explaining your options, here are some of the latest investment lending changes.

Over the past month, many of Australia’s lenders have made a variety of policy and pricing changes to their suite of investment loans.

Why?

In a nutshell, the industry regulator – the Australian Prudential Regulation Authority (APRA) – has determined that the property investment market is over-heated and measures need to be taken in order to cool it down.

To achieve that outcome, APRA has instructed Australia’s lenders to limit their growth in investment lending to 10 per cent year on year.

Some lenders are now at the 10% cap or very close to it, which precludes them from accepting further lending from the investor market.

In fact, there have been a small number of instances where lenders have already breached this cap.

At present, we’re seeing an inordinate level of pricing and policy changes taking place across the market, as lenders endeavour to manage investment lending flows.

We’re also seeing some lenders delay investor settlements in order to manage investor growth rates.

In addition, most of Australia’s lenders have increased the interest rates on their investment products, some by as much as 39 basis points.

Meanwhile, a number of other lenders have put restrictions on the types of investor customers with which they are willing to do business.

Some lenders have indicated that they will no longer lend to current property investors wishing to refinance their loan, while others have indicated that they will no longer lend to potential investors who wish to borrow more than 80% of the property’s value.

But the changes don’t stop there. In March, APRA also told Australia’s banks that they would now have to limit their interest-only lending to 30% of all new residential mortgages.

This announcement will force the banks to tighten the reins on investment lending even further, as interest-only loans are traditionally favoured by investors, who use it to reduce their mortgage repayments and ultimately maximise their taxation benefits.

And while there is no denying this recent spate of changes made it harder for some potential property investors to turn their property goals into reality, it hasn’t made it impossible.

There are still lenders who are not only happy to lend to property investors, but are also offering incredibly sharp interest rates.

Deal with an expert

A broker has access to hundreds of home loan products from a wide variety of lenders.

While some have significantly reduced their exposure to investor customers, others are still open and more than happy to do business.

A broker knows which lenders are happy to do business and which lenders are offering the best deals in this space.

They can help you to not only find a lender who is willing to make your investment goals a reality, but a lender who is willing to offer a competitively priced product and the ideal mortgage solution for your needs.

With so much complexity in the market and rates rising steadily, there has never been a better time to review your options and make sure you are still in the right product for your needs.

If you don’t already own an investment property, now is still a good time to get involved in the action.

Rates are rising, but they are still low by historical standards.