There’s been lots of talk lately about the banks crowding out property investors.
I recently wrote about the game changer of macro prudential controls being enforced by the banks with investors requiring higher Loan to Value Ratios, paying higher interest rates and having to overcome the hurdle of more difficult serviceability criteria.
In a recent report the ANZ Bank have given an update on the situation.
Here’s what they said:
• Tighter housing investor credit availability and the removal of lending rate discounts in recent weeks have the potential to curb housing investor lending growth.
• The recent changes come after the release of APRA’s guidelines on investor lending and a stepping up of supervision, although they could also reflect a reduced appetite for housing investor lending.
• The changes to investor housing lending practices are likely to have a marginal softening impact on housing sales and price growth, and as such will give the Reserve Bank some breathing space to keep rates low to support a broadening of the non-mining recovery beyond housing.
Banks initiate tighter housing investor lending
In recent weeks a number of banks have adopted a more conservative approach to housing investor lending, including removing discretionary discounts on housing investor interest rates, tightening new lending standards and in some cases lowering the loan-to-valuation ratio for investor loans.
While it is difficult to quantify the impact of these changes with any certainty, these moves will increase the cost of investor lending and limit the supply of somewhat less prudential lending to investors by some institutions.
These changes have followed APRA’s housing investor lending review process (as communicated in the macro prudential policy announcement in December 2014) and other communications from APRA outlining possible steps to discourage speculative investor lending in the housing market, including increased capital requirements.
While it is possible that some of the recent changes reflect slight shifts in bank appetite for investor lending it seems likely that the moves are related to attempts to meet APRA’s guidelines on investor lending.
According to APRA, more than 82% of investor lending remains within APRA’s macro prudential growth target (not materially above 10%).
While a number of lenders are comfortably below this range (around 12% of market share) and have scope to increase their exposure to housing investors, some lenders are tracking well above APRA’s macro prudential target growth range.