Property investors brace for big changes
Borrowing to invest in property is booming. More than 35 per cent of all home loans in Australia are now held by investors. And it’s not just affluent and professional people who are jumping into the property investment game. Mortgage industry expert Martin North from Digital Finance Analytics reported this week that said this week that 28 per cent of investment mortgages are taken out by professional people, 15 per cent of investors are “suburban mainstream” people, 14 per cent are “mature stable families,” 10 per cent are to “young affluent” investors, 9 per cent to “rural” investors (possibly farming families) and 5 per cent to “young growing families.” 19 per cent of all investment mortgages now active were started in 2016.
Total investment lending in Australia rose in the last 12 months by about $3.1 billion to $536 billion.
“We see investment lending still accelerating,” said Martin North.
Mr North said while lenders were still within the government regulator’s “speed limit” of 10 per cent growth in investor mortgages, lending “has accelerated in recent months.”
In an ominous sign for investors wanting to get a loan in 2017, Mr North says:
“We think the [10 per cent] limit should be dropped, as investment loan momentum is too strong, and well above inflation and wage growth.”
Investors face LMI changes
There are two big lender’s mortgage insurance companies in Australia. One of these insurers, QBE, has just announced big changes to premium rates for the first time since 2013. QBE’s absolute minimum premium has increased to $950.
“The premium loading for investors has increased to 12 per cent [from 7 per cent],” a QBE spokesperson told the industry newsletter Mortgage Business.
“This reflects the increased risk compared to lending to owner occupiers.”
QBE says this shouldn’t impact new loans, only existing property owners wanting to increase their existing property investment loan.
Some investors will get cheaper LMI costs.
QBE Australia said: “We’ve reduced the insurance premium rate for people borrowing more than $1 million.
The QBE spokesperson said LMI remains competitive and offers a valuable alternative to saving a 20 per cent deposit.
Property investors can research and compare investment housing loans from all of Australia’s major lenders here.