AMP halts housing investment lending

AMP Bank has stopped lending to investors as mortgage brokers warn interest rate hikes for landlords could lock out first- time buyers but lead to further discounts for owner occupiers.

AMP Bank has hiked rates on existing loans to landlords by 47 basis points, the biggest and latest lift by a lender as the industry moves to arrest growth in investment lending.

But unlike other lenders AMP Bank has decided to temporarily cease loans to new property investors in response to regulator concerns.

It will not take any new investor property loans until later in 2015, depending on market conditions.

“We appreciate the position this puts our customers in and will be working with our distribution network to actively communicate with them,” AMP Bank managing director Michael Lawrence said.

“Australia’s property market is experiencing high levels of investor property lending growth and we are supportive of the regulator’s intention to slow this growth to appropriate levels.”

Mortgage broker Mortgage Choice CEO John Flavell expected investors to pass on the additional costs from higher rates to tenants, which would make it harder for the large proportion of renters who are aspiring to own their own property.

“Tenants will feel the brunt in higher rents, the tenants that were looking to use investment borrowing as a mechanism into the market can’t get access to credit and the cost of that credit has gone up,” Mr Flavell said.

AMP Bank joins three of the four major banks, plus Macquarie, in lifting rates for investors after the Australian Prudential Regulation Authority set a “speed limit” restricting growth in investor lending to 10 per cent a year.

AMP Bank, a small player in Australia’s home loan market, plus ANZ and Commonwealth Bank have cut rates on some owner occupied loans.

Mr Flavell said further discounts for owner occupiers were possible.

“If lending institutions are focused on growing their mortgage footings and their ability to grow in the investment space is capped then they’ll look for opportunity in the owner- occupied space and I’d expect that the competition will heat up,” he said.

Westpac was the only major bank that had not yet hiked rates for property investors but faced the problem that its systems prevented it from increasing the standard variable interest rate for investment loans without also impacting owner occupiers.

“Our rates remain under review,” a Westpac spokesperson said.