Strange things in the investment home loan market
Strange things are happening in the investment home loan market
New, stricter rules for banks and credit unions have changed the home loan market for property investors. Investor home loans are often priced differently to owner-occupier loans and have different approval criteria. The income requirements for potential borrowers are tighter and some properties in some localities require much higher LVRs than in the past. Some lenders are refusing applications that one year ago would have been approved.
What is happening now in the investment loan market?
Lenders now insist that the borrowers clearly define whether a loan is for investment purposes or for owner-occupiers. Previously this distinction was not considered important to many lenders and thousands of Australian mortgages have been wrongly classified.
At the same time, rates have risen for investor home loans in response to new rules enforced by regulators. Now lenders are reducing rates again to entice investors back to a more affordable market.
Loan to Valuation ratios for investors have also risen, as risks in the property market are reassessed by lenders. Researching and comparing products in the property investment home loan market is more important than ever before.
Which banks and credit unions are lending to investors?
Some of Australia’s biggest banks are reporting that their investor loan portfolios are shrinking. Of the big four banks, only National Australia Bank is growing its investor loan numbers faster than owner-occupier loans. Australia’s biggest credit union, CUA, and some other minor lenders, have recently announced rate changes to attract investor loan applicants.
Commonwealth Bank is has reported a very low growth rate for investor lending. ANZ Bank’s investor loan book has declined in real terms by 0.9 per cent in the last year. Australia’s biggest lender to landlords is Westpac. This week, the banking regulator, APRA, reported that Westpac’s investor lending portfolio declined by 11.7 per cent over the 12 months to May 2016.
Why are investment loans being reclassified?
Westpac has reported that thousands of its investor home loans have been reclassified as owner-occupier loans. Other lenders, such as Commonwealth Bank, have also experienced a flood of borrowers reclassifying their loans. These reclassifications are in response to rate hikes for investors that do not apply to owner-occupiers. Clearly many former landlords now reside in their properties that were previously rented to tenants.
Good news for landlords
About 62 per cent of residential property investors declared a net rental loss last year according to tax office data analysed by CoreLogic RPData. Young property investors are most likely to be declaring net rental losses from their property investment.
The re-election of the Liberal/National Turnbull government means property investors are entitled to believe that changes to negative gearing proposed by the Labor opposition are not going to eventuate. That means losses from investments can be deducted from taxable income earned from other sources, like work.
How can I get a low rate investment home loan?
Low rate investment home loans are still available. Currently Infochoice lists nine investor home loans with a headline variable rate under fur per cent. There are many fixed rate investor home loans currently set under four per cent.
Go to the Infochoice home loans listings and select “Property Investors”. You can also choose whether to search for fixed rate or variable rate loans. there are now more than 150 investor loan products to choose from, from all of Australia’s major lenders.