INVESTMENT LENDER OF THE YEAR bcu
The regulator’s crackdown on investors has allowed the smaller financial players to shine
It’s not easy (or cheap) getting an investment loan these days. Thanks to the banking regulator APRA upping its pressure to rein in investor lending, there’s now a big difference between home loans and investments loans. So much so that Money and Canstar believe that it warranted a new category in this year’s Consumer Finance Awards. As the names suggest, Investment Lender of the Year and Non-Bank Investment Lender of the Year (see page 60) concentrated on just investment loans.
The impact of APRA’s rules has seen the gap between home loans and investment loans expand in more ways than just price. For instance, depending on the lender you’ll need to cough up a bigger deposit for an investment loan; the tax benefits of negative gearing may not be included in your serviceability, meaning only your income may be assessed; and you’ll certainly pay more if you just want interest-only. That’s assuming, of course, that you find a lender that will let you have this, as one of APRA’s latest requirements for financial institutions was to restrict new interest-only advances to 30% of total residential mortgage lending. This is in addition to the 10% investor loan growth cap that came into effect at the end of 2014.
There is good news, though, in that our winner and placegetters are very competitive on both price and features. You’ll also notice that all three are either a credit union or a mutual bank, which Canstar analyst James Slack says it a direct result of the major banks’ lending portfolios “shrinking at a faster rate than other lenders, resulting in higher rates for borrowers, and allowing smaller lenders to shine through”.
bcu, takes top spot. Put simply, it won because it has some of the lowest rates available in the market, especially for investors who are looking to make interest-only repayments on their loans.
Slack says at 3.89% bcu’s standout investment loan, the OMG Variable Rate Loan, is priced only 0.05% above the rate charged to owner-occupiers and well below the market average. “Also, bcu is offering access to lower fixed-rate loans for a $495pa fee – these rates start at 3.80% for one year which, depending on the amount borrowed, can justify the yearly fee,” he adds. Summerland Credit Union starts its investment loans with offset access at 4.39% and three-year fixed loans at 4.49%. There are cheaper loans but not with a mortgage offset facility. Victoria Teachers Mutual Bank takes out third place. Its Education package home loan is available for investors at 4.29%. It’s worth noting that you can borrow up to a 85% loan-to-value ratio (LVR) with no lenders mortgage insurance.
In general, if you find yourself going over the 80% mark, it’s worth trying to keep your LVR below 88% because once you exceed this the cost of mortgage insurance rises rapidly.