New restrictions could be placed on mortgage lending

Adam Smith 21 June 2016

house squeezeThe mortgage market is likely to see further restrictions placed on borrowers.

A report from analysts at Macquarie has claimed lending standards are likely to tighten further, according to the Sydney Morning Herald. The report follows a shadow-shop that found banks are competing aggressively for property investors, and have less conservative lending standards than their overseas counterparts.

According to the SMH, the report also revealed that banks were allowing property investors to borrow significantly more in proportion to their income than owner-occupiers, and were offering discounts of up to 1.4% off their standard variable rate. The report warned these discounts were likely to eat into banks’ profit margins.

APRA's investor lending crackdown

The report said even the most conservative lenders were willing to lend investors 6.8 times their income, whereas owner-occupiers could only borrow up to 5.3 times their income. The most aggressive lenders were found to lend up to 9.4 times a property investor’s income, the SMH reported.

The analysts found the gap between the amount investors could borrow and the amount available to owner-occupiers was “difficult to justify”. It predicted that the loan sizes available to investors and owner-occupiers would converge over time.

"While the changes implemented by banks appear to be prudent, we expect further tightening in lending standards over time. This would likely result in further pressure on housing prices and credit availability, which would ultimately result in ongoing pressure on housing volume growth,” the report said.

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