Making Sense of Investment Lending Changes
You may be wondering exactly what the changes mean – and particularly what they mean for you.
Briefly, the Government Regulators including the Reserve Bank have expressed concerns about a potentially overheated property market, especially in Sydney and Melbourne. APRA is looking to take the heat out of the market by slowing the growth of mortgage investment lending.
In its role as regulator of banks and financial institutions, APRA has issued guidelines designed to do that, as well as ensuring the ongoing strength of Australian banks.
APRA has asked banks to cap investment loan growth at 10% p.a. A number of lenders are already at, or even over, this limit, so they are under pressure to significantly reduce their investment lending.
The four major banks and Macquarie Bank are also required to increase the capital they hold against mortgages, which tends to increase the cost of lending. Banks have already passed on some of these costs to customers via higher interest rates.
What does this mean for you?
If you have a home loan that includes principal repayments or you live in your home, you may not be affected. In fact some lenders may decrease interest rates on that loan.
If you have an investment, or an “interest only” home loan, you may find that your lender increases the interest rate on that loan.
If you are looking at buying an investment property, you are likely to find the lending market more restricted than in the past. This doesn’t mean you won’t be able to find a loan that suits you, just that it may take a little more time. That’s where I can help.
Of course, everyone’s situation is different, and the information above is simply an overview. We are always happy to discuss your situation, particularly if you have any queries or concerns.