As recently advertised and widely communicated, borrowers in the investment property market have recently been faced with an increase in interest rates ranging from 0.25% to 0.49%.
This has resulted from concerns advised by APRA whereby the banks’ lending to property investors has far outreached the 10% thereshold growth.
APRA, the lenders governing body, has demanded that the banks slow the investment loan growth to less than 10% a year.
The recent interest rate rises for property investors may now pose a question mark around the revenue return.
Also, we have seen that the major banks have adjusted their “packaged” discounts for borrowers. Previously, they were very competitive in giving interest rate discounts of up to 1.10% for borrowers of owner occupied and investors. This has now been scaled back. An investor would not be offered the “very competitive and aggressive“ interest rate discount that an owner occupier borrower would be offered. Apart from interest rate discounts, the banks have dramatically finetuned their credit criteria for investor lending with some banks scaling back to 80% with even tighter serviceability tests.
Finally, as the banks constantly look at their often riskier property investment lending loans, they are now compelled to attract a higher capital buffer.
Therefore, with the forthcoming new capital criteria requirements for the banks (as of 1st July 2016), it can be presumed that property investor loans will carry even higher interest rates (as was the case some 30 years ago).
Contact Paul today to find out more about how this could impact your returns as an investor.