B Invested

BIG BANKS LOOKS TO ATTRACT MORE INVESTORS AND EASE REQUIREMENTS ON PROPERTY INVESTMENT LOANS

Late last year the Australian Prudential Regulation Authority (APRA) handed down a stern set of lending guidelines for the baking banking industry to follow which largely targeted property investors. The majority of Australian banks have since tightened their purses and put extra hurdles in place for investors to jump through in order to access property investment loans. Some banks applied tougher requirements than others, notably Westpac and St George which required 20 per cent loan to value ratios for investors.

The measures had been put in place in order to keep the growth of the property investment loan sector below 10 per cent per annum. The latest figures show that the measures have been working and investor loan growth is well below the target, sitting at just 7.2 per cent, down from the 11 per cent growth seen in the first half of 2015.

In response Westpac and St George have now reduced their minimum LVR requirements to 10 per cent down from 20 per cent in line with the rest of the industry. This means many investors may now be able to refinance their investments in order to release smaller amounts of equity and could use smaller deposits to access investment finance. However, tough serviceability calculations are still being applied which continue to limit borrowing power, meaning conditions still favour investors with lower loan to value ratios.

There are other signs in the finance market which are suggesting that banks are looking to open their books to more investors as investor interest rates become more competitive with more banks offering lower interest rates.