Investors feel pinch amid lending crackdown
Investors set to feel sting as APRA crackdown gains momentum, writes Kirsty Lamont, director at comparison site Mozo.com.au
The recent uplift in investor activity has prompted banks to again pull the reins in on their investor lending after concerns that banks are infringing on the 10% investor growth speed limit imposed by the Australian Prudential Regulation Authority (APRA).
Last week the Commonwealth Bank (CommBank) and its subsidiary, Bankwest cited regulatory commitments behind their recent move to suspend new lending for investors looking to refinance.
CommBank is Australia's largest lender so it is entirely possible that other lenders will follow its lead and further clamp down on investor lending by hiking rates. In fact, we've already seen a flurry of lenders target property investors with higher interest rates in recent months. Of the 84 lenders in Mozo's database, 39 have upped their variable investor loan rates since the start of December 2016.
The outlook for property investors is bleak, with nearly 90% of lenders now charging investors higher interest rates than their owner-occupier customers. The average price of an investor loan now stands at 29 basis points above an owner-occupier loan.
With some lenders offering much more competitive rates and requirements for investors than others, it's more important than ever for investors to diligently research what interest rates they can get elsewhere. Currently, there are nine lenders in the market that don't slap investors with higher interest rates, which means there are good rates out there for those willing to shop around.
Furthermore, a Mozo mystery shop revealed major lenders are still prepared to offer substantial discounts under the table to investors who ask them for a more competitive deal.
As long as the growth in the Sydney and Melbourne markets shows little sign of subsiding, the pressure for lenders to stay within APRA's investor loan growth limit or face increased capital requirements will endure.
However, industry experts have argued that the existing 10% speed limit is way too generous and has failed in putting a damper on fast-paced growth in investor lending. We believe that APRA is very likely to heed the calls of these experts by revising the investor growth limit down in the coming months.