Over the past 2 months, Australia’s largest banks have all tightened up on loans to investors. This is off the back of APRA’s (Australian Prudential Regulatory Authority) restrictions on the major banks to limit their lending to property investors (as opposed to owner-occupiers) at 10% annual growth – they have been growing more than this. If you’re seeking financial guidance or assistance with navigating these changes, it would be wise to consult experienced accountants in Sydney who can provide the necessary expertise and support.
Banks have reacted differently to this lending cap to deter growth in new investment loans by implementing stricter lending criteria. This includes:
1. Reduced lending ratios for investors (some have limited to a max of 80%)
2. Higher rates of interest for new and existing investment loans (whilst keeping owner-occupied loans at a lower level)
3. Notionally reducing the annual rental income on investments
4. Higher servicing assessment rates
5. Discounting negative gearing benefits in their servicing calculators.
These changes are just several ways banks can reduce their exposure to investors.
The most exciting change is the price differentiation between owner-occupied and investment loans, even for existing investors. For those old enough to remember, this was the case in the past – you would pay a premium for investment loans.
Banks (depending on their systems) have handled this differently, from implementing a rate increase for investor loans only to others increasing rates on all interest-only loans – which has impacted some owner-occupiers. You may or may not have received notification from your bank of changes to your existing loans.
What does this mean to the average investor? Now is the time to review your loans and see how your particular lender has affected you. You may then need to test the market to negotiate a better deal based on what deals are available.
The article was written by our Mortgage Specialist, Domenic Corigliano of Mortgagelink, a recent winner of the ‘Broker of the Year’ at the 2015 Australian Broking Awards.
*Correct as of August 2015
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
