Big changes have been developing in the lending sector in relation to investment home loans. This will affect many of you who already have, or are considering investment lending. This issue is for current and developing changes. New announcements are coming out weekly so please follow us on Facebook or Twitter for individual lender announcements, or call us to discuss loan switching, loan review, or other general questions you may have. For those without investment lending, please feel free to forward this article to investors you know who will be interested in the changes, given there are some tight deadlines below from two major banks. These announcements are specific to my current lender panel so will not represent all lenders in Australia. Some lenders are increasing on interest only regardless of whether they are investment loans or not, and some are restricting their maximum loan to value ratio heavily, this is mostly in relation to investment loans but some have also reduced owner occupied loan LVR’s.
AMP
No longer accepting investment lending including self managed super fund lending. Variable rates on existing investment loans are to increase by 0.47% effective 7th September 2015
ANZ
Variable rates for investment loans are increasing by 0.27% as of the 10th of August. Fixed rates for investment lending have already increased by up to 0.30% across the various terms on offer.
Commonwealth Bank
Variable rates for new and existing investment home loans will increase by 0.27% effective Monday 10th August 2015. Fixed Rates all increased between 0.10% and 0.40% across terms for investment loans as of today
Bankwest
Super Start Home Loans reduced to 4.09% yet investment loans increased to 4.39% across this product range effective 28th July
ING
All investment lending is capped at a maximum of 80%
Owner occupied refinance loans capped at 80%
Macquarie
Fixed and Variable rates increased today by 0.27% for investment loans
NAB
Variable rates increased by 0.29% as of the 10th August for all interest only loans, regardless of whether they are investment or owner occupied loans.
Interest only fixed rates for owner occupied and investment will increase by 0.29% on the 10th August. It is uncommon to have notice so there is still time to ring your bank and lock in the current fixed rates.
Why are these changes happening?
APRA, under advice from the Reserve Bank, are monitoring banks lending practices and requiring that they limit their investment lending growth to 10%. The banks are therefore adjusting the attractiveness of their investment lending in order to slow growth. As a means to balance their lending portfolios they will be more aggressive in obtaining larger shares of owner occupied lending markets. As a result you can expect to see better discounts for owner occupied loans, and higher margins for investment lending. We are already beginning to see some refinance campaigns announced for owner occupiers, enticing borrowers to leave their current lender and move their borrowings over. This typically attracts sub 80% lends as nobody with LMI fees wishes to move and pay again, so this will be a popular strategy for banks and lenders in balancing their owner occupied vs investment books, whilst bolstering capital holdings and lending growth whilst still throttling the investment growth.
Other recent changes
All major banks have adjusted their loan to value ratios for investment lending. In many cases, you must now have larger deposits for investment loans, in nearly all cases you will require 10% plus costs, unless you have a very strong equity position in other property. Many smaller lenders and banks were already in this position due to earlier targeting by APRA to balance their investment lending growth or hold more capital.
Some lenders, such as Bankwest, St George, and ING will restrict investment lending to only 80% already. These changes have been occurring over the past months.
Some lenders are now also adding up to 20%-25% buffers on investment loan repayments, and/or no longer including the negative gearing benefits for borrowing capacity. Nearly all lenders are now assessing your new home loans at nearly 3% above your actual repayment also. Further to this, the housing expenditure measure (which is an industry measure for the cost of living for each household, adult and child) has been revised up a number of times, so this will drive affordability down for new loans. Overall, borrowing capacities are being affected. So it is important to obtain verifiable employment sources, be consistent in your incomes, and at all times, talk to your brokers about how to improve your borrowing power if required.
AMP
No longer accepting investment lending including self managed super fund lending. Variable rates on existing investment loans are to increase by 0.47% effective 7th September 2015
ANZ
Variable rates for investment loans are increasing by 0.27% as of the 10th of August. Fixed rates for investment lending have already increased by up to 0.30% across the various terms on offer.
Commonwealth Bank
Variable rates for new and existing investment home loans will increase by 0.27% effective Monday 10th August 2015. Fixed Rates all increased between 0.10% and 0.40% across terms for investment loans as of today
Bankwest
Super Start Home Loans reduced to 4.09% yet investment loans increased to 4.39% across this product range effective 28th July
ING
All investment lending is capped at a maximum of 80%
Owner occupied refinance loans capped at 80%
Macquarie
Fixed and Variable rates increased today by 0.27% for investment loans
NAB
Variable rates increased by 0.29% as of the 10th August for all interest only loans, regardless of whether they are investment or owner occupied loans.
Interest only fixed rates for owner occupied and investment will increase by 0.29% on the 10th August. It is uncommon to have notice so there is still time to ring your bank and lock in the current fixed rates.
Why are these changes happening?
APRA, under advice from the Reserve Bank, are monitoring banks lending practices and requiring that they limit their investment lending growth to 10%. The banks are therefore adjusting the attractiveness of their investment lending in order to slow growth. As a means to balance their lending portfolios they will be more aggressive in obtaining larger shares of owner occupied lending markets. As a result you can expect to see better discounts for owner occupied loans, and higher margins for investment lending. We are already beginning to see some refinance campaigns announced for owner occupiers, enticing borrowers to leave their current lender and move their borrowings over. This typically attracts sub 80% lends as nobody with LMI fees wishes to move and pay again, so this will be a popular strategy for banks and lenders in balancing their owner occupied vs investment books, whilst bolstering capital holdings and lending growth whilst still throttling the investment growth.
Other recent changes
All major banks have adjusted their loan to value ratios for investment lending. In many cases, you must now have larger deposits for investment loans, in nearly all cases you will require 10% plus costs, unless you have a very strong equity position in other property. Many smaller lenders and banks were already in this position due to earlier targeting by APRA to balance their investment lending growth or hold more capital.
Some lenders, such as Bankwest, St George, and ING will restrict investment lending to only 80% already. These changes have been occurring over the past months.
Some lenders are now also adding up to 20%-25% buffers on investment loan repayments, and/or no longer including the negative gearing benefits for borrowing capacity. Nearly all lenders are now assessing your new home loans at nearly 3% above your actual repayment also. Further to this, the housing expenditure measure (which is an industry measure for the cost of living for each household, adult and child) has been revised up a number of times, so this will drive affordability down for new loans. Overall, borrowing capacities are being affected. So it is important to obtain verifiable employment sources, be consistent in your incomes, and at all times, talk to your brokers about how to improve your borrowing power if required.
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