Important news announced by APRA (Australian Prudential Regulation Authority) on Thursday, the 26th:
The limit of investor lending growth to no more than 10 per cent will be discontinued as of 1st of July, 2018.
Why? APRA believes that the 10 per cent cap imposed in 2014 has reached its purpose of reducing lending growth, lifting standards and even cooling down housing markets. APRA Chairman Wayne Byres says: “There has been a clear reduction in higher risk lending, with investor loan growth moderating, interest-only lending declining and high loan-to-value lending also markedly lower.”
Benefits? APRA’s decision can intensify the competition between banks for a healthy investor loan book which means that hopefully, the gap between owner occupiers and investor rates (principal & interest repayments) could reduce.
Cons? With more investors back in the market, the added competition for first home buyers could put a stop to predicted price falls in parts of Sydney and Melbourne.
What’s next? The interest-only lending is still capped to less than 30 per cent of all new home loan approvals provided by lenders. APRA also believes that there is a lot more to be done in improving other aspects of lending such as: how a borrower’ expenses are assessed; how existing commitments are taken into consideration; and how to handle applications that fall outside of a lender’s policy.
We don’t believe this will make borrowing easier necessarily, although it does provide some confidence in the housing industry which has been undergoing some tough regulations recently. We hope that interest rates for investors will start to decrease as competition for these loans increase from the banks, although it is important to note that capital requirements are still higher for investment loans which make them more expensive for the banks to provide.
As the 1st of July approaches we will provide more information on any impending changes or opportunities which may occur.
Please get in touch if you want to know more.
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