This week Commonwealth Bank announced it is no longer refinancing investor loans. Days later the Australian Bureau of Statistics (ABS) produced data showing that in December, the value of investor lending fell 1 per cent.
If you are thinking about buying an investment property does that mean the banks won’t lend to you?
The CBA announcement caused a lot of shock – and there was conjecture that the other banks would follow suit. But, drill down and you see that much of the slamming on the handbrake was for CBA-specific issues.
The Australian Prudential Regulation Authority (APRA) has told the banks that it does not want them increasing their investment lending by more than 10 per cent a year – and it appears that CBA has recently failed APRA’s test.
Figures released by Digital Finance Analytics showed that CBA investment lending has been growing at 10.3 per cent – above APRA’s ‘speed limit.’
APRA’s Chairman, Wayne Byers, said in a speech this week “Lenders that choose to operate beyond these benchmarks are under no illusions that supervisory intervention, probably in the form of higher capital requirements, is a possible consequence.”
Almost certainly, CBA realised that it was travelling at more than 10 per cent investor growth and decided to slam on the brakes before being punished by APRA.
Other banks’ response to CBA may not be as draconian. The Digital Finance Analytics figures show that NAB, ANZ and Westpac investment lending is growing at five to seven per cent.
Informal talks we have had this week with CBA indicate that this investor growth is their aberration. But the writing is on the wall, the Mr Muscles of home loans is APRA and any individual lender which breaches its targets risks a clip round the ear.
Of course, if CBA can find themselves having to jam on the brakes to avoid a speeding fine, so can others in future.
Get ready for other banks unilaterally making it tough to get investor loans. This means that you will need to stay close to your broker s/he needs to know at any time which lender is hungriest for your business.
A lender which is not nervous about Mr Muscles will be able to offer you the best deal – good brokers know who they are.