Property investors now make up almost half of the new mortgage market in Australia. Two years ago, government regulators put a speed limit on sales growth of new mortgages to property investors. This led to slightly higher interest rates on investor loans and tighter loan criteria.
Now, sales growth of new loans to investors is concerning the government again. The Australian Bureau of Statistics reports that investment loan sales boomed in the second half of 2016.
Recently the Reserve Bank noted “stronger demand from investors” and warned that investors have confidence in the housing market at the moment but if that sentiment changes it could pose a risk to the economy. The International Monetary Fund has warned Australia that our banking regulators must “stand ready to intensify targeted prudential measures” if investor lending accelerates.
The chief of the Australian prudential regulator said last week that the average property investment loan is now higher quality and safer than a few years ago.
Many Australian lenders fear further intervention by the regulators and so some banks are introducing even tighter restrictions on investment loans.
Which banks are limiting investor loans?
Some banks and lenders are acting now to limit lending to property investors.
Bankwest has announced that it will no longer accept refinancing applications from investors currently borrowing with another bank. Bankwest is still accepting applications from investors for new home loans.
Last week, Australia’s biggest home loan lender Commonwealth Bank followed suit and announced that it will not be accepting new investor home loan refinance applications “until further notice”. Like Bankwest, Commonwealth Bank is still accepting new loan applications from investors.
Now Commonwealth Bank has made a second change to limit investor lending. From 3 April 2017 Commonwealth Bank will increase rates on interest-only mortgages for investors by 0.12 percentage points to 5.68 per cent.
Commonwealth Bank will also raise rates on its Viridian Line of Credit investor loan products by 0.04 percentage points to 5.82 per cent.
What is the cheapest home loan for investors?
Investors can still get great home loan deals. InfoChoice lets you compare the total cost of each loan, including rates and fees with our “5 Year Cost” comparison column included in all InfoChoice home loan comparison tables. The five year cost column shows the costs associated with a $500,000 loan, including repayments.
InfoChoice’s 5 Year Cost comparison shows that:
iMortgage’s Fusion Principal and Interest loan has fixed rates well below four per cent and may cost investors less than any other loan in Australia over five years at $153,624.
Homestar’s Investment Property Loan has a variable comparison rate of 3.73 per cent and a five year cost of $153,894.
Homeloans’ Ultra Plus investment loan has a variable comparison rate of 3.85 per cent and a five year cost of $155,283.
You can research and compare all home loans from Australia’s major, and minor lenders here.