As the banks fall inline with APRA’s demands to lower the amount of interest only and investment lending. Borrowers are feeling the pinch in a few ways.
1) The borrowing capacity calculators used by most banks have become less generous. With lenders changing (lowering) the amount of rental income that can be used. Or not accepting part/all of the negative gearing benefits as they once did.
2) Supply and demand rules dictate that in a time of low supply prices will increase. Which has been the effect for anyone after an interest only loan. The rates have gone up and the banks are making more from these loans per $$ lent (though maybe not in total as the restrictions limit the “size” of the pie). 1-2 years ago these rates were the same as principle and interest repayments. Now is safe to add at least 0.25%pa to the P&I rate for interest only. Which some lenders then stinging investment interest only loans again with a further 0.25%!!. If you are building an investment property with one lender then it must be a P&I loan.
3) I have heard from one bank that while an investment loan may service and be inline with bank policy . If its not a “strong” deal then it won’t be approved. Another lender is reducing the rate discounts on Investment lending, bumping up the price further if you need to use that lender for lending policy reasons.
4) SMSF lending is under pressure with rates and fees increasing with most lenders.
5) It is very difficult for overseas residents to get a mortgage in Australia.
So what is the upside to all this? Hopefully less competition in the market when you are looking to buy a house. The owner occupied, P&I loans are as cheap as they have ever been and the banks are fighting for this business. So there are good specials and cash rebates out there. Additional pricing consents from some lenders if you ask the right way ( email us to find out more).
