Why banks are cracking down on investors and what you can do

Adam Smith 1 March 2017 NEWS

Why banks are cracking down on investors and what you can do

Investment lending may be tightening, but options still abound.

In 2014, the Australian Prudential Regulation Authority, or APRA, decided to put the brakes on investor lending. As property prices skyrocketed and investment lending made up a bigger and bigger slice of the home loan pie, the regulator decided it was time to cool the market down.

The regulator put a 10% limit on growth in investor lending, hoping this would take some of the heat out of the housing market. The cap doesn’t seem to have done much, as investor loans now make up 40% of the market.

Why banks are cracking down

APRA has expressed its concern to Australian banks. They seem to have taken the message on board, with numerous lenders lifting rates on investors and putting new restrictions in place. Commonwealth Bank and Bankwest announced they would no longer offer new investor home loans through the mortgage broker channel, while AMP said it would halt accepting new investor refinancing customers.

The changes appear to be a proactive move by banks to stave off further regulatory intervention. APRA chairman Wayne Byres told an economic conference that, while there were no plans to further restrict the regulator’s 10% cap, lenders knew to stay in line or risk further APRA action.

"At least for the time being, the benchmarks that we communicated – including the 10% benchmark for annual growth in investor lending – remain in place and lenders that choose to operate beyond these benchmarks are under no illusions that supervisory intervention is a possible consequence," Byres said, according to SBS.

While there is some debate among global regulators about whether or not investment home loans are inherently riskier, APRA said it targeted the segment because of its accelerated growth.

“We highlighted investor lending because it was an area that we observed accelerating credit growth and very strong competition, a combination in which the temptation to compete and protect market share could well drive a weakening of standards,” Byres told a group of economists at a 2015 business luncheon.

"By moderating growth aspirations, we are reducing the tendency for lenders to whittle away lending standards in the name of matching competitors, because inevitably, when it comes to lower standards, it's the other guy's fault.”

What you can do

While many lenders may be clamping down on investors, there are still steps you can take to better position yourself if you’re looking for an investment loan.

Save a bigger deposit

Some lenders have restricted the loan-to-value ratio (LVR) available to investment customers. This means you might need to save a larger deposit to see your loan approved.

Consider P&I payments

Interest only payments are a common strategy employed by investors. By only paying the interest portion of a home loan, investors can keep their monthly repayment to a minimum. The idea is to later sell the property for a capital gain. The problem with interest only payments is that they don’t reduce the principal, or original amount borrowed. This can be a real risk should a property decline in value, and some lenders are beginning to tighten their rules around interest only repayments. If you want to increase your chances of approval, consider making principal and interest repayments instead.

Look at the alternatives

While many lenders are tightening their investor offerings, others still have very competitive deals for investors. Non-bank lenders are in a unique position to appeal to investors, as they are not regulated by APRA and aren’t bound to the 10% lending cap. Compare investment loans below to see what’s on offer.

Compare today's investment home loan rates

Rates last updated May 24th, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.99%
3.99%
$0
$0 p.a.
80%
Refinance to this loan and you could get $1,000 in your USaver account (offer conditions apply). Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.99%
5.17%
$600
$0 p.a.
90%
Competitive rates for fixed for 3 years with redraw facility.
3.88%
3.88%
$0
$0 p.a.
70%
You'll need at least a 30% deposit to get this low investor rate. 100% online application process.
3.89%
3.89%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate property investment loan.
4.15%
4.76%
$600
$0 p.a.
90%
A competitive rate with no ongoing fee and borrow up to 90% LVR.
4.14%
4.14%
$0
$0 p.a.
80%
Investors pay no application or ongoing fees on this loan from an innovative online lender.
3.89%
3.95%
$600
$0 p.a.
95%
Borrow up to 95% LVR with no ongoing fee.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.50%
4.82%
$600
$0 p.a.
90%
A variable interest-only loan to fund your investment. Get this loan with a 10% deposit.
4.09%
5.28%
$0
$395 p.a.
90%
Lock in a competitive investment rate and combine your loan with a credit card and transaction account for extra savings. Package fee applies.
3.99%
4.93%
$0
$0 p.a.
95%
A low deposit investment loan with a discounted, competitive rate from one of the big 4 banks.
4.09%
4.49%
$0
$395 p.a.
90%
Enjoy all the benefits of a full-featured package investment loan, including a 100% offset account.
4.19%
5.49%
$600
$8 monthly ($96 p.a.)
90%
Lock in your investment repayments for 3 years with one of the big 4 banks. Available with a 5% deposit.
3.99%
4.02%
$0
$0 p.a.
80%
Investors can enjoy flexible repayment options and pay no application or ongoing fees.
4.65%
4.69%
$600
$8 monthly ($96 p.a.)
90%
You can get this variable investment product with a 10% deposit. The loan has limited fees.
4.55%
5.39%
$499
$0 p.a.
95%
Fix your investment mortgage repayments for 3 years. Available for investors with just a 5% deposit.
4.29%
5.39%
$0
$395 p.a.
95%
Enjoy advantage package discounts on financial products on this investor mortgage. $1,500 cashback offered to refinancers. Conditions apply.
4.79%
5.44%
$0
$395 p.a.
90%
Pay off your investment knowing your exact repayments for the first 4 years. Get this loan with a 10% deposit.
4.29%
4.31%
$0
$0 p.a.
80%
A variable rate loan for investment. Suitable for customers borrowing $1 million or more to buy a property.
5.59%
$0
$395 p.a.
90%
Make interest-only repayments and unlock equity in your home. Combine your mortgage, credit card and transaction account for discounts.
5.79%
5.93%
$600
$8 monthly ($96 p.a.)
95%
Purchase an investment property with a variable rate mortgage from one of the big 4 banks. No settlement fee.
4.09%
5.46%
$0
$395 p.a.
90%
Get 5-15% discounts on insurance products with this package investment loan from CommBank. Available with a 10% deposit.
4.19%
5.47%
$0
$395 p.a.
95%
Fund your investment with a low deposit package loan from ANZ. Bundle your loan with credit card and bank account for discounts.
4.54%
4.85%
$0
$299 p.a.
80%
Borrow $1 million or more and maximise your investment strategy with this interest-only mortgage.
4.89%
5.50%
$0
$395 p.a.
95%
A low deposit package investment loan. Fix your rate and plan your repayments for years in advance.
4.39%
4.23%
$0
$198 p.a.
70%
Fund your property investment with this fixed rate mortgage which includes a 100% offset account. 30% deposit required.
4.24%
4.55%
$0
$299 p.a.
80%
A loan for investors borrowing $1 million or more. The product includes a 100% offset account.

Compare up to 4 providers

Find out more about investment home loans in our guide

Get more from finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.
Ask a question
Go to site