Investor rates up as CBA joins in

THE nation’s biggest bank has become the second lender to lift investor mortgage rates.

A flood of changes by Australian banks is now expected as they reprice to pay for higher regulatory costs.

The Commonwealth Bank raised its interest rate on investor home loans by 27 basis points to 5.72 per cent, joining ANZ, which made the move the day before.

Both banks were responding to regulatory pressure to take heat out of the market which has seen lenders told to reduce the growth of their investor mortgage book to 10 per cent for the year.

The move will add about $600 a year to the average $300,000 investor mortgage.

The Commonwealth Bank said demand for investor home loans was at “historic highs”.

Just as ANZ did, the Commonwealth shielded owneroccupied loans from the changes.

“As Australia’s largest home lender, we support the prudential regulator’s actions to ensure lending practices remain sustainable,” retail banking services head Matt Comyn said.

“Despite making a range of changes to our investor lending policies in the past few months, we have witnessed ongoing investor lending growth.”

Analysts at Deutsche Bank yesterday told clients the changes were further evidence the major banks would reprice assets in order to offset return on equity pressures from higher capital requirements.

Aside from the 10 per cent ceiling, the regulator has over the past fortnight instituted a range of new requirements for the nation’s biggest lenders to strengthen their capital buffers, which is expected to cost more than $20 billion.

Earlier this week a survey of five analysts by Bloomberg found Australia’s biggest banks may see their average return on equity fall to 14.5 per cent by 2017 from 15.6 per cent in their latest fiscal years.

This would be the lowest level since 2009 with the blame directly pointed at fresh regulatory measures to shore up the financial system to force lenders to hold more capital.

The Commonwealth Bank has been growing at 9.9 per cent for the year while ANZ was just above the limit at 10.6 per cent growth for the year.