If you’re an active investor you may have heard there have been some changes recently in investment lending, but in many cases investors do not find out these changes until they apply for finance thinking they are eligible, only to find out the changes the hard way.
In December 2014 APRA (Australian Prudential Regulation Authority) put forward a proposal for tighter lender standards across the mortgage industry and investors are the ones that have lucked out the most with these new changes.
The goal of the new changes is to bring residential investment property lending to 10% or less of any given lenders total lending. The new changes did little to curb investor lending, with investor lending continuing to surge in Sydney.
In May 2015 APRA stepped in again putting pressure on lenders to modify their policies to ensure their residential investment lending is back at 10% – and this time the banks have listened and implemented a range of changes that means applications that where being approved a few weeks ago, are now being declined.
Luckily, it has been mostly left up to individual lenders to decide how they will tackle this and so it has led to a range of changes spanning multiple lenders, rather than a blanket approach. This means that whilst it is certainly tougher than ever for investors to obtain finance, there are still opportunities if you know where to look – but you may need to consider non major lenders, and even utilising multiple lenders to access different policies and competitive pricing.
One lender has reduced all lending that involves investment properties to a maximum LVR (loan to value ratio) of 80%. This includes any owner occupied properties linked to the investment loan. So previously you could lend up to 95% on both the home and investment, now it is 80% across both properties. This change has seen many current pre-approvals being declined where they would have been approval only weeks ago.
Other lenders have increased their pricing on investor lending to make it less affordable in the hopes that it will make it less attractive to invest.
There are many changes, but the important thing to take away is that whilst they certainly make is harder to find the right lender – it is not the end of the line.
Speak with a mortgage broker, they should have a fair idea of which changes are affecting which bank and be able to navigate you to a lender that will assist you with your requirements.
The changes are not yet complete and there will be more to come, smaller lenders are yet to implement their changes and so there is still some opportunity to make the most of current lending policy,
Daniel Reid is an authorised credit representative of WLS Corporation Pty Ltd ATF Bonnet Family Trust T/As Acquest Financial Services. ACN: 165 598 005 – ABN: 95 321 378 611 Australian Credit License #: 447074 – Credit representative #: 398944