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Investor loan changes continue to unfold

Wednesday, 2nd Sep 2015

loan applicationAustralia’s finance watchdog, the Australian Prudential Regulation Authority (APRA), has continued to increase pressure on the country’s lenders in a bid to restrict further growth in investor loans.

Since the June edition of Property Wealth News, when we first reported APRA’s intentions to implement tougher lending criteria for investor loans, Australian lenders have moved to meet the new requirements.

This entails lenders observing a speed limit of 10% annual growth in investor loans, which is designed to cool the overheated property markets in Sydney and Melbourne, which have been driven largely by investor activity.

Effectively, there’s no silver bullet for lenders to meet the new requirements and as such these institutions are changing any, or all, or the following to meet the 10% target:

  • Acceptable loan-to-value ratios
  • Serviceability requirements
  • Interest-rate buffers
  • Negative gearing allowances
  • Rent allowances
  • Rate adjustments

To ensure lenders are taking the necessary steps to increase scrutiny of investor-loans, APRA has begun auditing these financial institutions on a weekly basis.

Amid these changes to assessing investor-loans, property investors should seek advice from brokers that specialise in investment finance.

This is particularly pertinent for investors who are considering purchasing a property within the next 12 months, but also applies to any other property investors to ensure their loans remain the most suited to their long-term circumstances.