New statistics released today have revealed that the crackdown against investment lending has had an impact.
Property investors signed up for $12.6 billion of mortgages in April, according to the Australian Bureau of Statistics. That was 2.3 per cent lower than the March result.
APRA, the banking regulator, announced on 31 March that it wanted lenders to make it harder for certain types of borrowers, including investors, to qualify for mortgages.
RateCity’s money editor, Sally Tindall, said APRA would be pleased with the initial result, after saying it wanted to improve lending standards in an increasingly risky mortgage market.
“Over the last two months we’ve seen investors lift interest rates for interest-only loans, reduce the maximum loan-to-value ratios and tighten serviceability requirements,” she said.
“This explains the drop-off in investor activity in April – and there’s a good chance we’ll see a further reduction in investor activity when the May results are released.
“According to a recent analysis of all the loan products on RateCity.com.au, the average interest-only loan costs an extra 30 basis points for owner-occupiers and an extra 24 basis points for investors.”
Refinancing activity has also fallen significantly
The other key statistic to come out of today’s ABS data was the sharp reduction in refinancing activity.
Mortgage holders made $5.8 billion of refinancing commitments in April – down 4.4 per cent over the month and 17.8 per cent over the year.
RateCity’s money editor, Sally Tindall, said this should be a wake-up call to borrowers, who could potentially save tens of thousands of dollars by refinancing their loan.
“Three in four borrowers have their mortgage with a big four bank, even though challenger lenders can offer far better value,” she said.
“If you’re an owner-occupier with a bit of equity up your sleeve, you should be able to demand a pretty good rate.
“If you were an owner-occupier with an outstanding mortgage of $350,000 at an LVR of 80 per cent and you wanted to refinance, a quick comparison on RateCity.com.au shows that there are many smaller lenders undercutting the big four.
“For example, if you switched from ANZ’s discounted standard variable home loan, at 4.65 per cent, to Reduce Home Loans, at 3.44 per cent, your monthly repayments would fall from $1,985 to $1,741, assuming your remaining loan term was 25 years.
“Over the 25-year loan term, your repayments would fall from $595,600 to $522,282 – a saving of $73,318.”