- APRA (Australian Prudential Regulation Authority – the regulator for the banks) has warned the Banks not to increase investor loans by more than 10% per year
- APRA’s seasonally adjusted figures show they are at about 10% at the moment – so its more a precaution against strong growth rather than a reaction to it
- It is a measure to ensure the market doesn’t get speculative, rather than slowing the market down
- Sydney the only market that is at risk with houses growing by 15.5% in the last year (RP Data)
- Melbourne grew by just 8% last year according to RP Data, hardly worrying levels.
What does it mean for you
- Most banks have reduced LVR’s (loan to value ratios) to 80%. With the majority of investors owning other property (i.e the family home), they borrow well under 80% of the total value of those properties anyway
- Some banks have reduced the discounts they offer to new investors. This stinks of a cash grab by the Banks, we don’t see it slowing investor activity
- Some banks have slowed down or stopped lending to SMSF’s
These changes have been introduced to simply reduce the risks for overenthusiastic investor borrowers, making clients on a more sound financial footing more attractive to the Banks.
Nyko Property welcomes the APRA recommendations, this common sense approach to reducing risk should not have to come from APRA or the banks though, we as investors should put those restrictions on ourselves. Investing and borrowing only when its comfortable and safe to do so.
The below link summarises the changes in a bit more detail. For more info on what impact these changes may have for you contact our office.