Major banks slash interest rates out of cycle, and ease LVRs to lure more property investors; Mortgage War: CBA reduces investor mortgage rates by 40 basis points
Tweet Topic Started: 24 May 2016, 12:01 PM (7,456 Views)
After banks put the brakes on lending to property investors in 2015, several are now easing off the pressure and trying to spur on more borrowing among buyers who drove the recent housing boom.
The changes are intended to lift banks' loan growth after a regulatory crackdown, but economists also say stronger lending to property investors could create new risks, amid signs house prices are heating up again.
In what mortgage brokers say is a clear trend, several banks have recently shown a greater willingness to lend for property investment.
Westpac, the country's biggest lender to landlords, this week began allowing customers to include the tax benefits from negative gearing in their loan assessments, unwinding changes made last year, and last month it started accepting smaller deposits from investors.
Bank of Queensland last month raised its maximum loan to valuation ratio (LVR) for investors to 90 per cent, from 80 per cent, a change that allows investors to have smaller deposits.
Australia's biggest credit union, CUA, also lifted its maximum LVR to 85 per cent, from 70 per cent.
Other banks are using the other big "lever" at their disposal to ramp up growth – price.
Lenders including Bankwest, ME and UBank have cut three-year fixed rates for investors below 4 per cent, and brokers say lenders including Commonwealth Bank are prepared to offer discounts of up to 1.5 per cent off their advertised interest rates.
The changes follow a near halving in housing investor credit growth, from a peak of 11 per cent a year in 2015 to 6.5 per cent, after the banking regulator capped growth in this market at 10 per cent a year.
"Banks don't want to miss the market," said chief executive of Mortgage Choice, John Flavell.
Managing director of mortgage broker Homeloanexperts.com.au, Otto Dargan, said several lenders, including Commonwealth Bank, had become more competitive in their home loan pricing for investors in recent months, by offering lower interest rates.
These lower interest rates are not always publicly promoted, but can include discounts off the standard variable rate for investors of up to 1.5 per cent.
Westpac, the country's biggest lender to landlords, this week began allowing customers to include the tax benefits from negative gearing in their loan assessments, unwinding changes made last year, and last month it started accepting smaller deposits from investors.
Bank of Queensland last month raised its maximum loan to valuation ratio (LVR) for investors to 90 per cent, from 80 per cent, a change that allows investors to have smaller deposits.
Australia's biggest credit union, CUA, also lifted its maximum LVR to 85 per cent, from 70 per cent.
Other banks are using the other big "lever" at their disposal to ramp up growth – price.
Lenders including Bankwest, ME and UBank have cut three-year fixed rates for investors below 4 per cent, and brokers say lenders including Commonwealth Bank are prepared to offer discounts of up to 1.5 per cent off their advertised interest rates.
"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
I think thats what they are hoping for. Must have seen the damage it was starting to cause, shown with those huge drops in the December quarter, and then followed up by another fall in the first quarter.
It started to unravel and they panicked. Maybe they were starting to lose too much market share. Perhaps it was being reflected in their share price.
Might keep that building boom ticking along like it is now. Literally building more rooms than the population is actually growing. And now being reflected in falling rental prices. Might get more interesting as the ever increasing record amounts keep flowing on, putting even more downward pressure on rents.
Should get even more interesting once this construction boom peaks, and like Ireland, we will have a lot of properties and huge loans, but no many jobs left to pay for it all.
No some will self destruct, that should keep those who take advantage of another's negative ticking along nicely.
Especially when they don't need to research IR.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$ It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do. Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
Commonwealth Bank of Australia, the nation’s largest lender, is planning to cut investment property interest rates and slash minimum loans by more than 90 per cent, triggering claims by rivals of a price war between property investment lenders.
It comes as more than 160 home loan products – both owner-occupied and investor – slip below the benchmark 4 per cent, encouraging property buyers to shop around for best rates.
ME Bank, which is owned by 29 superannuation funds, today announced rates cut of up 40 basis points to 4.24 per cent on investor property loans with a deposit of 20 per cent or less.
CBA, which accounts for one in four property loans, is cutting rates on its “extra home loan” and “extra investment home loan” products by more than 40 basis points to 4.24 per cent and 4.51 respectively. The bank’s standard variable rate is 5.35 per cent.
”There is a mortgage war out there,” warns Martin North principal of Digital Finance Analytics, a consultancy for major banks and finance service providers.
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