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

Adam Smith 1 March 2017

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 February 20th, 2018
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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%
4.02%
$0
$0 p.a.
80%
A loan with a special investment rate and an offset account.
3.89%
3.91%
$0
$0 p.a.
80%
Package your owner-occupied loan with your investment loan and enjoy low rates for both.
3.99%
3.99%
$0
$0 p.a.
80%
Investors can take advantage of a discounted standard variable rate.
3.88%
3.88%
$0
$0 p.a.
70%
A competitive investment loan with a low rate that requires a 30% deposit.
3.99%
4.00%
$0
$0 p.a.
80%
A low-fee variable rate investor loan with a fast online application process.
4.19%
4.21%
$0
$0 p.a.
80%
Pay no application fee on this low variable rate investment home loan.
3.89%
5.40%
$0
$395 p.a.
95%
A package investment loan with a competitive, discounted interest rate and 0 application fees.
3.99%
4.62%
$395
$0 p.a.
80%
Fix your interest rate and pay principal and interest repayments on your investment.
4.34%
4.87%
$0
$0 p.a.
80%
Lock in a low 2-year fixed rate with this interest-only investment loan.
4.14%
4.14%
$0
$0 p.a.
80%
An investment home loan with competitive rate and 100% offset account.
4.44%
5.37%
$0
$395 p.a.
90%
Lock in the interest rate on your investment purchase for 3 years and enjoy the benefits of a package home loan.
4.59%
4.60%
$0
$0 p.a.
80%
A variable rate interest-only loan for investment. Fast application, low fees, optional offset account.
4.19%
4.59%
$0
$395 p.a.
90%
Enjoy all the benefits of a full-featured package investment loan, including a 100% offset account.
4.11%
4.01%
$0
$0 p.a.
80%
Enjoy a fast application process and flexible repayment options with this fixed rate investment loan.
4.54%
5.58%
$600
$8 monthly ($96 p.a.)
95%
Get a competitive 3-year fixed rate to buy your next investment property.
4.39%
4.42%
$0
$0 p.a.
80%
An interest-only loan for investors. Access equity to further your investment opportunities.
4.29%
4.05%
$0
$0 p.a.
80%
This fixed rate investor loan has limited fees and flexible repayment options. 100% online application process.
4.79%
5.44%
$0
$395 p.a.
90%
Package your 4-year fixed rate investment loan and pay no application fees.
4.09%
4.11%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
4.55%
5.39%
$499
$0 p.a.
95%
Enjoy a competitive 3-year fixed rate with no ongoing fees.
4.29%
4.17%
$0
$0 p.a.
80%
Borrowers can borrow up to $750K with 2 years lock in rate for their investment property.
4.19%
5.37%
$0
$395 p.a.
95%
Plan ahead by locking in your rate for 3-years on this investor loan. $1,500 cash back available for refinancers. Conditions apply.
4.65%
4.69%
$600
$8 monthly ($96 p.a.)
90%
Save on a no-frills home loan that offers a competitive rate without the bells and whistles.
4.29%
4.31%
$0
$0 p.a.
80%
A Simplifier Home Loan with no application fee or ongoing fee.
5.59%
$0
$395 p.a.
90%
Package your home equity loan to save on rates and fees.
5.79%
5.93%
$600
$8 monthly ($96 p.a.)
95%
A competitive rate to help you purchase your next investment property.
4.44%
5.53%
$0
$395 p.a.
90%
Enjoy a 2-year fixed rate with no establishment fees or annual credit card fees, all for an annual package fee of $395.
4.39%
5.51%
$0
$395 p.a.
95%
A competitive 2-year fixed rate to help you invest in property.
4.64%
4.95%
$0
$299 p.a.
80%
A loan with no application fee.
4.59%
5.37%
$0
$395 p.a.
95%
Enjoy the stability of an investment home loan rate locked in for 5 years.
4.39%
4.23%
$0
$198 p.a.
70%
4.24%
4.55%
$0
$299 p.a.
80%
A loan with no application fee and borrow up to 80% LVR.

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