2015 APRA Changes to Lending Requirements and Their Impact on the Investor
What is APRA?
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the Australian financial services industry. Their role is to regulate the behaviour of lenders, banks, credit unions, building societies, general insurance companies, private health insurance agencies and the superannuation industry.
APRA’s 2015 directives:
APRA announced earlier this year that it wanted to “slow investor growth” and, presumably, take some of the heat out of the property market by making debt for investors a little more difficult to raise (and establishing a benchmark of a maximum annual growth rate for residential investment mortgages per institution at 10%). As a result, many Banks have started to wind back the flexibility around their suite of products aimed at investors and have raised the hurdle rates for successful funding applications. On the face of it this is a sound approach and should not cause any significant issues for investors with quality portfolios and solid financial structures in place.
Home buyers and investors with a good deposit and the earnings to service their loans should have nothing to fear from these changes.
At Intuitive Finance, we have always worked with investors to put in place wealth building investment strategies that involve the right mix of property types, locations and on the ground management, and in turn have these strategies supported by a financial framework that is sustainable and profitable over the longer term.
In detail, here are some of the changes announced by a number of banks…
- Some lenders are starting to remove their Interest only loans for new investor borrowers, instead offering only Principal and Interest options.
- Some lenders (including AMP) have changed the way they assess the way you can service your loans and rather than than using ‘current” interest rates to check serviceability, will use a benchmark rate of 7.5% (currently) on a P&I basis
- Some lenders who previously lent to investors at LVR’s of up to 97% are now reducing (or have been made to reduce) all new lending to LVR’s of 80% or less meaning you may require a larger deposit than previously and may find it more difficult to leverage properties or access equity to invest further if you are already an investor.
- Some lenders are cutting back on the pricing discounts made available to investors and investment only lending products.
- We expect that most investment loans will soon be set at higher interest rates than many owner occupied mortgages however the differentials are still to be determined and its worth noting that we have never seen such a competitive banking environment as now.
It’s clear that the lending landscape is currently in a state of flux and we will certainly keep you up to date with any developments as they come to hand. In my opinion, however, the most important thing to do now is to take some time to review your strategies for the next phase of your wealth building programme understanding that there will be lower LVR’s for investment lending, reduced borrowing capacity as servicing requirements become stricter and, most likely, higher interest rates. We can certainly help you with that
If you would like to discuss the current lending requirements and how they may impact your investment strategies moving forward, please don’t hesitate to call or email me.
Please click here (contact us) or phone us on 1300 342 505 or mobile: 0406 383 024 or alternatively email firstname.lastname@example.org to request a follow up phone call
Investors new to Intuitive Finance
Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or complete a review of your existing portfolio. Again, please don’t hesitate to contact me via email or phone to discuss your wealth building strategies.
Please contact us or phone us on 1300 342 505 to arrange a free consultation with one of our qualified consultants to assess your current financial position and detail a range 0f investment strategies to consider
About Intuitive Finance
The team at Intuitive Finance will listen to your needs, undertake a comprehensive review of your current financial position and then provide a clear, detailed and comprehensive investment strategy for you to put in place. We have written close to a billion dollars in loans and our team has access to over 500 financial products from more than 30 lenders covering a myriad of requirements – from home loans for repeat and first home buyers to first time and astute investors – and is perfectly placed to help guide you through the available options