Update on recent changes to investment loan rates and policies. What does it mean for You?

There has been a lot of talk over the last few weeks about changes to investment loans. I wanted to give you a brief snapshot as to what’s happening and what it means for you;

• The government through APRA (Australian Prudential Regulation Authority), who are the regulator for all Banks, Credit Unions and Building Societies, feel that investment lending has contributed significantly to the rise in housing prices. To slow this price rise down they have told all Banks to cap Investment lending to 10% of their portfolio.
• APRA have actually been having this discussion with the Bank’s for about 9 months, but since Banks have done very little, APRA have now come out with a big stick to ensure Banks put changes in place immediately.

Some of the changes that we have seen in the last couple of weeks are:

• Borrowing ratio’s for investment and interest only loans have reduced with many lenders. Many have reduced borrowing limits to 80% of valuations and AMP, for example, have stopped Investment loans altogether in the short term.
• Most Banks assessment methods have changed. APRA wants a more standardised approach in regards to existing loans and expenses. This means in many cases your borrowing ability may be reduced.
• APRA have also told the Banks they need to hold more of their own capital against the loans. As a result many banks have already increased Investment Loan rates to assist in raising capital.

What this means to you:

• What we are going to see from now on is a difference in Owner Occupied rates to investment rates. This was common 15 years ago, when most Banks put a margin on Investment loans. We will now see this ongoing.
• We will also see in the short term a difference in Lender policies in regard to Owner occupied Loans and investment and Interest Only loans
• Your Borrowing ability may be reduced
• Interest rates on your investment loan may have increased

So in summary, lenders are going through some major changes in regard to policy and rates for Investment loans. This is being driven by APRA, and it is to slow down and reduce investment lending. Unfortunately this could have an impact you

It is probably a good time to review your loans, as your repayments or borrowing ability may be impacted as a result of these changes by APRA.

Please feel free to either call or email me if you would like more information on the home loan changes or to discuss what this means for your personal circumstances.

Regards,

Sunshine Coast Mortgage Broker