Property Investment Loans – New Regulations Shake Up Lending

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In the last months we have seen lenders tightening up their lending to property investors for both existing and new customers.

The Australian Prudential Regulation Authority (APRA ) recently moved to tighten lending criteria for property investment loans, many lenders are forced to reduce their lending risks.

 Why?
The reason for the stricter lending criteria is that APRA set a benchmark of 10% maximum growth for residential investment mortgages. The big banks were beginning to exceed this benchmark level and APRA had to take action.

By taking these measures, APRA is attempting to make the property market conditions safer for consumers. Rapid growth in property investment lending can be perceived as risky as investors may be placing ‘all their eggs in one basket’ rather than having investment diversification.

Lending criteria to reduce growth varies from lender to lender but we have seen changes across the board from banks to non banks. Some have already implemented the changes while others will be applying them soon in the coming months.

What do the changes mean for investors?
While banks and other non bank lenders have announced varying policies here is an overview of some of the measures that have been put in place for both new and current borrowers:

Stricter criteria to approve investor loans
This includes excluding certain properties for investment purposes. For example, not lending in certain postcodes or types of properties that are deemed high risk. Rural properties and high density apartments are prime examples.

Increased Interest Rates for Investment Loans
We have seen an increase in investment loan interest rates from the major banks and non-banks. This means that banks are no longer offering discounts for investment loans as they previously did and packaged.

Lenders are also penalising borrowers with “interest only” loans but will offer a discount for property investment loans that are paid with “principle and interest” repayments.

Deposits raised up to 20%
Lenders have also increased the required deposit. Previously, property investors could borrow up to 95% of the property’s value but some lenders require a 20% deposit where they can only borrow up to 80% of the property’s value.

Some lenders are not allowing investors with a current investment property to use the existing equity in that property to leverage for further investments where the LVR falls outside the 80% LVR benchmark – effectively forcing them to refinance.

Rental Income For Servicing Decrease
Lenders have reduced the amount of rental income taken into consideration when assessing an applicant’s income. Some have also taken out the negative gearing component in the assessment. This means that property investors will need to show other income outside their property investments to obtain a loan if servicing the loan is tight.

What do the changes mean for owner occupier buyers?
Predictions are that the owner occupier market will increase as a result of tightened criteria for property investment loans. Many lenders have recently announced a raft of changes to new owner occupier loans including lower interest rates, cash back offers and the waiving of annual fees.

Where to From Here?
While these changes affect banks and non-banks in different ways there are discounts that still can be found.

You can compare property investment loans at our mortgage comparison pages.

If you are looking for a home loan deals for owner occupied properties go to our compare home loans page.

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October Interest Rates On Hold

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The Reserve Bank of Australia have decided to leave interest rates on hold for the 5th month in a row. The widely expected announcement to keep the cash rate at 2% is a conservative approach to see how the rate cuts earlier this year affects the economy.

We expect that lenders will therefore leave their variable interest rates unchanged as well, but will be monitoring in case of any changes outside the official rate.

To see current interest rate both variable and fixed rates please go to out mortgage comparison page.

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Commercial Loan Interest Rates Update

Commercial loan variable  interest rates have remained stable for the last 30 days while fixed rates have decreased across all years .

All variable, equity line of credit, low doc and lease doc interest rates have remained stable for August / September 2015 period as there was no interest rate change to the cash rate as determined by the Reserve Bank of Australia.

Fixed interest rates have fallen. Most notably was the 5 year fixed interest rates that saw a 0.20 – 0.30 percent drop amongst commercial loan lenders. The 3 year fixed rate also declined between .10 and .20 percent amongst lenders. The shorter term 1 and 2 year interest rates  saw the least movement between 0.01 to 0.10 percent.

For more information about commercial property loan interest rates and to find a commercial loan suited to your lending needs please visit our commercial loans site.

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ING Direct Interest Rate Discount 3.99% (CPR 4.19%)

ING Direct have reduced their Orange Advantage home loan  product at a variable rate of 3.99% (comparison rate 4.19% p.a.) which will be available until 31st October 2015.

This offer is only available for;

– New residential lending with new to ING DIRECT security property (standard minimum loan amount applies)

– Borrow up to 80% of the properties value

– Only for Owner occupied loan purpose

– Principal & Interest repayments

Other advantages is that ING Direct will waive the first year annual fee values at $199 and reduce any fixed interest rate product by 0.10%.

To view this product click here or compare it to hundreds of other products you can compare home loans here

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Interest Rates Remain Unchanged for September

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The Reserve Bank of Australia have decided to leave interest rates on hold for the month of September. The widely expected announcement to keep the cash rate at 2% is a conservative approach to see how the rate cuts earlier this year affects the economy.

Economists are predicting a 0.25% cut for November on Melbourne cut day. This will be  a welcome announcement for mortgage holders but I do not expect the banks and other lenders to pass on the full interest rate cut. We saw examples of this back in May when only one of the major banks reduced interest rates by the full amount.

To see current interest rate both variable and fixed rates please go to out mortgage comparison page.

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Westpac, ING Direct, ME Bank Interest Rate Announcements

After the Reserve Bank of Australia decided to reduce variable interest rates by 0.25% on Tuesday these lenders are also reducing their home loan and investment loan variable interest rates.

Westpac like the NAB and the Commonwealth Bank decided not to pass on the full interest rate cut and reduced their variable home loan and investment loan rates by 0.22% effective 18th May.

ME Bank will reduce their variable interest rates by 0.25% effective 22nd May 2015. You can compare ME Bank variable loans

ING Direct also announced that it will be reducing their interest rates for residential and commercial property loans by 0.25% on the 18th May. You can compare ING Direct home loans here

To see how other lenders are responding and the dates they will reduce their rates – Lender interest rate reduction and date

To compare home loans and investment loans click the button below

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