The Reserve Bank of Australia has left the cash rate unchanged at 2 per cent for the third month in a row, a decision that was widely expected. The move caused an immediate jump in the Australian dollar by half a cent to 73.4 US cents from around 72.9, reflecting that the central bank’s next move on interest rates may be up.

In the last month we have seen the most change in the lending market since the GFC, and it could impact you now and in the future.

Why are these changes happening:

News stories about the booming property market are almost a daily occurrence. One of the driving factors have been a big increase in the number of active property investors. In an attempt to keep property price growth at a stable level, and reduce the risk of a property bubble, APRA (the government body who regulates the banks) is requiring banks to reduce the amount of new lending they are providing towards investment property purchases.

What changes have been made:

APRA’s requirements have resulted in varied reactions from Australian banks. Here are some of the more common approaches banks are implementing to cool down the investor market.

– Increasing interest rates on investment loans and/or loans with interest only repayments. So far these increases range from 0.25 per cent up to 0.47 per cent, with a handful of banks yet to announce their changes. Other banks have advised they will no longer be providing additional interest rate discounts for investment loans. 

– Reducing the loan to value ratio they will lend at for investment purposes. Some banks are limiting new investment loans to 80 per cent of the property value, and one bank has pulled out of providing new investment loans altogether. 

What one bank can offer you now may be very different to another banks’ options, and we are here to guide you through receiving the best possible overall package for your circumstances.

As always, please do not hesitate to contact us if you have any questions, or would like to speak to us regarding a new or existing loan.