Mixed fortunes on rates
Investors to pay more for loans
THE low loan rate party for investors is ending, but beginning for owner occupiers, who could be about to enjoy discounted fixed rates and packaged home loan deals.
Many lenders, including most of the major banks, have hiked interest rates for investors while also making it harder for them to get loans as the regulator tries to take some of the heat out of the investment property market.
Financial comparison website RateCity’s banking analyst Peter Arnold says housing investors will be paying more, while lenders may now instead sweeten the deal for those people buying property as their home.
“I think the low rate party for investors is ending,” he said.
“The lowest rates are going to be offered to people who are intending on living in the property and investors will get charged the full amount.”
Mr Arnold said it marked the end of investors and owner occupiers getting about the same deal in housing loans, or in some cases investors getting an even better deal through rate discounts.
“It’s something where investors are going to pay more than owner occupiers, as far as how much they pay in the rate and how much they have to bring as far as a deposit,” he said.
Some lenders have already cut fixed rates for owner occupiers and experts say further discounts are possible.
Mr Arnold also predicts more lenders will reduce or stop the rate discounts they had given investors while tweaking discounts offered to owner occupiers through package deals which combine home loans, credit cards and savings accounts.
“I think between the fixed rates and the package discounts, even more of that differential pricing for the whole variable book, investors are going to be paying a lot more,” he said.
“Risk-based pricing is some- thing I think we’re going to see more of, whether that’s residential versus investment or within residential we’re already seeing a lot more pricing by LVR (loanto-valuation ratio) – you have a big deposit, you pay less.”
The Australian Prudential Regulation Authority has set a “speed limit” restricting growth in investor lending to 10 per cent a year and will require banks to hold more capital against their mortgage books.
Mr Arnold said the changes are designed to stabilise the market and to slow down housing price growth.
“As an owner occupier that is what you want: it’s your home, it’s your biggest investment. You don’t want property prices increasing too quickly if that means they’re going to come down in price at some point.
“It also means if you’re an upgrader, if investors aren’t running so hot then it eases the competition for who you’re fighting against on the property ladder.”
UPS AND DOWNS: Low loan rates for investors might be ending, but owner occupiers may be set to enjoy discounted rates.