As finance is vital for property investing (especially with the correct structure that keeps your home safe and protects your borrowing capacity) many have been talking regarding the latest changes to investor lending as the Australian Prudential Regulation Authority (APRA) seek to curb investor lending to below 10%.
Some of the new changes include:
- Reducing the LVR to 80% requiring a 20% deposit plus costs with no LMI
- Increasing the interest rate for investment loans (removing rate discounts)
- Removing the negative gearing benefits from within the loan calculators
- Increasing interest rate for serviceability calculators
Before we panic, some of these changes make sense as an 80% LVR is not a bad thing (please note, currently this is not across all lenders at all and not all lenders are changing all of the above) and to be honest, whilst we may not see sexy/unbelievable once in a life time historic low interest rates for investment – in all honesty, we are still able to achieve very attractive interest rates for investment.
With some of the big banks currently running at 11.5% investor property lending, adjusting this investor property growth lending to 10% will require changes to be implemented and this is what APRA want to see.
It is not all bad news: CoreLogic RP Data’s head of research, Tim Lawless, said that 60 per cent of new loans in NSW were to investors, so a likely slowdown in investor borrowing would dampen price growth in Sydney. He predicted prices would continue to rise, but below 10 per cent. “Obviously if you’re an investor, it probably means that getting a loan might be a bit more challenging,” Mr Lawless said.
I have had one client advise me that they are now “sitting out” due to the APRA changes, whilst I respect this, perhaps this is just another hurdle to overcome in building your wealth through property.
Remembering that everything cycles and that we simply do not get this time again, whatever the hurdles are, we need to get over them and keeping it safe is a good thing for everyone.
Data source: SMH May 2015 Clancy Yeates and James Eyers