Changes to Investment Lending
Ripple effects from property booms in Melbourne & Sydney have now reached investment home loan borrowers throughout Australia. Earlier in the year the Gov’t regulator (APRA) grew concerned about skyrocketing property prices & asked the major banks to ensure their investment lending did not grow by more than 10%. They directed this to the major banks because they hold 80% + of the total Australian home lending mortgage book.
The lenders adhered to the direction by increasing the investment lending rates & also cutting back on what an individual could borrow as a percentage of the property purchase . Many lenders now require 20% deposit + the buy in costs. So now there is a much greater variation between lenders on policy relating to these two issues, how much will they lend against an investment home & at what interest rate?
To complicate things, some lenders are also placing a higher risk / interest rate on loans that have interest only repayment terms rather than principal & interest.
Now a client in a circumstance where they have both owner occupied home lending & investment home lending, for tax reasons might choose to pay down the non-tax deductible component of the debt at a much faster rate, which makes common sense. However they might get priced at a higher interest rate for the tax deductible loan portion which they have decided to not reduce in the short to medium term.
All these changes provide a great opportunity to review your lending position with us & strike a better deal where possible. Contact Michael on 65832211 to discuss this further.