Investment lending effected by property prices

The property booms in Sydney and Melbourne have begun to affect investment lending and have ripple effects for borrowers throughout Australia.

Earlier this year, the Australian Prudential Regulation Authority (APRA) grew concerned about skyrocketing property prices. They asked the major banks to ensure their investment lending did not grow by more than 10 percent.

When investment lending and home prices kept climbing, APRA stepped in, forcing the big banks to bump up interest rates on their investment loans. Some banks have also increased deposits for investment properties from 10 to 20 per cent in a bid to thwart activity.

The rapidly changing market has left many investors looking for new lenders. Additionally, those owner-occupiers with interest-only loans, commonly used by investors, have been left wondering if they will be penalised unintentionally.

Adding further pressure to interest rates is APRA’s requirement for major lenders to maintain higher cash reserves to withstand loan defaults in the event of an economic downturn.

If you are looking to invest in property or have an interest-only loan, talk to your mortgage broker about navigating these changes and securing the right loan for your circumstances.