In the past couple of months we have seen significant changes in the Australian investment loan market.
As you may have seen recently in the media, the Australian Prudential Regulation Authority (APRA) – the prudential regulator of the Australian financial services industry – is concerned about the recent strong growth of lending to property investors, particularly in Melbourne and Sydney. APRA’s concern is that a real estate market slow-down could see a dramatic increase in loan defaults.
Accordingly, APRA has strongly recommended that lenders benchmark the growth in their investment loan portfolios at no more than 10% per annum and, additionally, directed the five major Banks to increase the amount of capital they hold against their residential loan portfolios.
As a result, interest rates on investment loans (in particular interest only and Line of Credit facilities) have increased across all major lenders. There has also been a host of changes to lending policies; all aimed at ensuring a sustainable growth in the home loan investment sector and improving the strength of Australia’s financial services industry. Many changes have already been implemented, but we feel there are plenty more to come.
Should I Refinance?
If you have noticed an increase to your investment loan rate, please be assured that your lender is not the only lender making these changes. Our recommendation is not to make any quick decisions, as any potential refinance could end up costing more, but to contact us by email or phone (03) 9882 2500 so as we can discuss your individual financial position.
Cash Rate – No Change
The Reserve Bank of Australia (RBA) has announced it will maintain the official cash rate at 2.00%.
Notwithstanding the extreme market volatility last week the RBA remains comfortable to remain on the sidelines until there is significant financial data which influences the next change. The reduced Australian dollar, improvement in our employment numbers and the proposed interest rate increase in the United States is providing the RBA with comfort to defer any movement at this stage.
Suite 11, Level 1, 255 Whitehorse Road
Balwyn Vic 3103
PO Box 1200
Greythorn Vic 3104
P. (03) 9882 2500