You may have read in the media over the last couple of weeks that the Australian Prudential Regulation Authority (APRA) has told lenders that they must limit their investment lending growth to 10% each year.
The major lenders have also been asked to set aside approximately 50% more capital by the end of this financial year. This will make our financial institutions significantly stronger, but at a cost to borrowers.
Many economists also see these moves as an effort to cool the overheated housing market in NSW and Victoria.
As a result of these requirements, the major banks and many other lenders have made sweeping changes to investment lending policies and prices with one lender not lending for investment purposes at all! Some of these changes include:
- Reductions in the maximum loan to valuation ratio (LVR) for investment loans. Some lenders have reduced their maximum LVRs from 90% to 80% meaning borrowers need to come up with an additional 10% cash or equity in other property.
- The removal or reduction of discretionary pricing on investment loans resulting in a disparity in rates between owner occupied and investment loans. This has resulted in investment interest rates increasing by up to 0.47% among our lending panel.
- Increased serviceability interest rates. When determining your serviceability or borrowing capacity, lenders usually include a buffer above the actual interest rate. These minimum servicing rates have increased by as much as 0.50% with some lenders.
- Minimum Living Declared Living Expenses have increased.
There is a raft of other tweeks that lenders have made to their investment policies.
There has never been a more confusing time in the investment lending market. If you are thinking of purchasing an investment property or thinking of refinancing an existing mortgage, please call Anthony Martin at Laurentide Mortgage Solutions on 02 9954 5044. He can assist you in determining the most suitable and cost effective loan for your situation