While the Reserve Bank has dropped interest rates, APRA (Australian Prudential Regulation Authority) is trying to cool Sydney’s housing market by scrutinizing banks’ lending policies for investment purposes. This has led to many lending policy changes by the major four banks in the last few weeks, specifically in regards to investment lending, including changes to the LVR (Loan to Valuation Ratio), SMSF (Self-Managed Super Fund) lending and types of acceptable income.
So what has changed?As you may know, lending policies vary between banks, but it now looks like the banks that have been particularly interested in property investor business are pulling back. Some of the changes include:
- Higher interest rates for investment borrowings. It seems most lenders will no longer discount the interest rate applied to investment borrowing.
- Some lenders will now use an assessable interest rate of 7.5% (currently) on a P&I basis, to service loans, rather than using ‘current’ interest rates.
- NAB and ANZ are no longer lending to buy residential property in SMSFs.
- AMP will now use 80% of rental income for servicing purposes – previously used 100%.
- Macquarie will now lend a maximum of 90% LVR (inclusive of LMI) and Bankwest a maximum of 80%.
And how will this affect you, as an investor?
- Higher interest rates
- Lower LVRs for investment lending
- Reduced borrowing capacity due to stricter servicing requirements