The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the Australian financial services industry. Their role is to regulate the behaviour of lenders, banks, credit unions, building societies, general insurance companies, private health insurance agencies, and the superannuation industry.
In December 2014, APRA wrote to all deposit-taking institutions setting out sound lending standards, particularly for investment lending, that included a benchmark for the 10% maximum growth of residential investment mortgages. This occurred because of concerns over the number of people entering the property investment market and the stability of lending for this market considering current economic conditions.
APRA is also requiring the major banks to hold more capital in reserve to protect against potential mortgage losses. Up from the current average mortgage risk weight of 16%, APRA are increasing it to 25% on residential mortgages.
All lenders and financial institutions are changing their criteria for property investment lending in order to meet APRA’s requirements. Most major banks have announced that they will be cutting the discounts available on investment loans, meaning that interest rates on new investment loans could be slightly higher than interest rates on owner-occupied home loans.
Plenty of lenders are still offering investment loans to borrowers who qualify under their new investment lending criteria. If you are looking to use property investment as a means to build wealth for your future, you should talk to us about your plans and investment goals sooner rather than later.
Tiffen & Co.
0423 565 566