Further Rate Hikes for Borrowers

 

Recently, there have been several significant changes to lending practices by all lenders, which were introduced in order to slow investment lending across Australia to try and avoid a downturn in the property market.

To enforce this further, the Australian Prudential Regulation Authority (APRA) introduced a 10% cap on investment lending growth and mandated that all banks were to comply with the cap. In addition to the 10% cap, they also increased the number of capital requirements that lenders are required to hold. The implementation of this was to ensure our banking system remains robust and able to tolerate any downward movement in property prices.

When these new policies were introduced, we immediately saw some lenders having to reduce their investor home loan approvals. This was achieved by reducing loan to value ratio’s for investment lending and increasing interest rates for investment loans to reduce borrowing capacities and make investment loans less appealing.

Several lenders soon followed suit as APRA monitored the landscape closely to ensure the policies implemented would create the desired effect within the market.

However, with increased compliance and pressure on lenders, many were forced to increase their rates primarily to interest only for investment loans. Unfortunately this led to an overflow effect and in turn affected some principle and interest home loans for the everyday homeowner.

So, given this information, what can you do for your clients?

  • Put them in touch with us to review their current home loan. Rates are at an all time low and it’s important to make sure your client is paying the lowest interest rate possible.
  • Make sure your clients have budgeted for future rate rises. Interest rates aren’t expected to stay this low forever, so it’s important to plan ahead and protect your client.

If you or someone you know would like to know more about how these new policies may have affected your loan, get in touch with us today.