One of Australia’s biggest lenders has made sweeping changes to its investor lending policies, RateCity understands.
BankWest has also increased charges by up to 0.6 percent for existing customers with investment loans. For existing investors who have a $500,000, 30 year loan, the RateCity home loan calculator indicates that a 0.6 per cent increase in investor rates from 4.4 per cent to 5 per cent would increase the borrower’s monthly repayments by $144 a month. Over the loan term, that’s $54,000.
BankWest has also made it more challenging by tightening terms and conditions for overseas’ customers. They are lowering the maximum loan to value ratio (LVR) to 60 per cent for borrowers living overseas or temporary residents and overseas citizens borrowing with an Australian citizen or permanent resident.
The move is significant, however not totally unsurprising given how many of the country’s biggest lenders have had to change their review processes or increase investor rates (or a combination of both) in response to a crackdown on the faced-paced growth of investor lending.
APRA “Speed Limit”
This crackdown has been at the direction of the Australian Prudential Regulation Authority (APRA) who introduced a “speed limit” on investor lending of 10 per cent calculated monthly across the country in 2014.
APRA data from December showed CBA’s investment portfolio was growing 35 per cent faster than the entire system. Overall investment was growing at an annualised rate of 10.1 per cent.
Loan to value ratios (LVRs) were initially the first measures to be targeted in this crackdown, with major lenders capping borrowings at 80 per cent of the value of a property. Some major lenders then removed the negative hearing benefit for investment loans. Property investors were then made to prove they have tens of thousands of dollars in reserve for every year of their loans.
“We will continue to monitor the impact this change has on our customers and the market, in order to maintain prudent lending and sustainable business,” the confidential memo to brokers said.
No doubt many more lenders will follow suit in the upcoming months.
RateCity encourages new and existing property investors to utilise its home loan calculator and ensure they have the most competitive mortgage.
You can also take advantage of our home loan refinance calculator while this is still available from most lenders.