Due to the recent guidelines issued by the Australian Prudential Regulation Authority (APRA), lenders have been forced to crack down on lending to property investors. APRA has demanded banks to cap investment loan growth at 10% p.a., which a number of lenders are already at, or even over, this limit, so they are under pressure to significantly reduce their investment lending. The other major demand is for the lenders to increase their capital requirements, which has directly led to interest rate hikes on existing investment loans.
For the first time since the 1990s, lenders are charging property investors higher interest rates than owner-occupiers in an attempt to remain under the investment loan cap of 10% and to bolster their capital positions.
Last month, APRA & ASIC made recommendations to the lenders in an attempt to curb investment lending. Based on these recommendations, most lenders have made changes to their investment loans, increasing interest rates for investors, however some have been a bit slower in doing so. There are expectations that more changes are to come as a result of APRA & ASIC crackdown on investment lending, although it is unlikely there will be further rate hikes by the lenders.
These changes have not only affected new investment mortgages, but lenders have increased interest rates for existing loans in an attempt to comply with the new regime. Home owners who initially took out an investment loan, but have since moved into their property as an owner occupier are advised to speak to their Launch Finance Broker to look at changing the investment loan to an owner-occupier home loan to take advantage of the lower interest rates.
Investors are advised to carefully consider the lender for their investment loan, as there are currently wide variations of investment interest rates. If you think this may affect you, please speak to your Launch Finance Broker who will discuss how these changes affect your personal situation.