INVESTMENT

Big Banks Move to Slow The Investment Market

Bishwas Bhattarai, Senior Lending Manager

BS MIE, Dip Fin Pann.

05 March 2017

There is no denying that with the current trend of the sky rocketing housing price caused alarm bells are ringing for some. Especially, added weight and caution added by Glen Stevens from Reserve Bank of Australia adding his own 2 cents in the equation.

However, majority of economist and so called expert are still confident Sydney’s demand driver market is still performing well and continue to do so however, voiced together the currently trend of the growth may not continue at the same rate.

Since, the last month few of the banks have joined force and placed stringent lending criteria within the investment property market with a bid to cool off the heated investment property market. And it is the usual suspect Big Four majors are there to improvise changes. However, few experts are convinced it will provide any tangible impact.

As these counter measure does comes to no surprise and was more to address the issues raised by Australian Prudential Regulation Authority (APRA) , who wrote to lenders warning the danger of escalating the increase investor loan in their portfolio by no more than 10% early December 2014. With given boom with investment property market most of the lenders have found them to be on bit over this benchmark hence, this measure was more towards the portfolio correction. Current APRA figure  on May 19th 2015 shows collectively investor market grew by 12.4% or over $450 billion in the year to March which no wonder sent alarm bells ringing Banks to act promptly.

Current measures from Big Four to deteriorate current investment lending are

ANZ

  • No interest rate discount for property investor without the owner occupied loan with ANZ

CBA

  • 80 per cent loan-to-valuation Cap for Investment loan (Via BankWest subsidiary)
  • Reduced rate discount for new investor
  • Removed $1 000 rebate for new investors

NAB

  • Reduced rate discount for new investors
  • Exited investment lending to Self –managed super funds (May not be fully related to this measures only)

Westpac

  • Reduced rate discount for new investors (Including subsidiary St George, Bank of Melbourne , Bank SA and RAMS)
  • Stricter loan criteria for ‘nonresident’ home lending

As since the major 4 banks continue to hold over 82% of the total housing debt it is very formidable in near future more strictest lending criteria will be adhered. Given the demand driven marker and high auction clearance rate the outlook is still positive for housing market.

However, on the same note there are numerous other lenders out there who have not changed their criteria or discount that are offered to the investor as well as the owner occupies. They are willing and have the appetite to win the business with the higher rate cuts than ever before.