Australian banks have been tightening investment lending due to recent expectations set by the Australian Prudential Regulation Authority (APRA).
This has further complicated the mortgage market and some might see this as a negative, arguing that Australia’s mortgage industry is already one of the most heavily regulated in the world. However, we think that APRA has gone about its business very sensibly.
The NZ equivalent to APRA took a direct policy intervention approach a few years ago when all new home buyers/borrowers were forced to come up with a 20% deposit. This had an immediate and dramatic impact on the housing market. NZ’s regulator reasonably quickly stepped back from that direct policy setting approach.
APRA have taken a less interventionist approach by setting expectations with our banks and other lenders. Over time, APRA want to see Australian banks make the following changes…
Owner occupied home loans should have principal & interest repayments rather that interest only payments.
Investment loan approvals to be tightened
Tighter control over foreign investment loans
These expectations aim to ensure sustainable growth in the home loan investment sector, to protect both investors and the home loan market.
I guess what we are trying to say is that APRA have set some general targets and left it up to the lenders to decide how to get there. This has produced some very interesting decisions over the last 2 weeks:
some lenders have stopped offering discounts for investment loans
some lenders have offered better discounts on owner occupied loans
some lenders have said that borrowers must have a 20% deposit for any investment loan purposes
some lenders have offered bigger discounts to people with bigger deposits
some lenders have started to price loans with principal & interest repayments cheaper than interest only loans
some lenders have tightened up their “how much can you borrow?” calculators so investors can borrow less than owner occupiers.
some lenders don’t have to make changes, and still offer competitive, open and flexible policy options
The emphasis is on “Some lenders”. Every lender has adopted completely different approaches to achieve APRA’s expectations.
None of these changes will have an impact on existing borrowers at this stage. However next time you request a change, or try to restructure your existing loans, it could be a different experience.
The mortgage market has just become even more complex. We are working overtime adjusting our mortgage qualification systems so that our clients can easily find the most suitable lender.
If you would like to look at your loans and give them a health check please call me on 0411 777 876.