Massive change for Aussie property investors
PROPERTY investors are set to get some relief after the Australian Prudential Regulation Authority (APRA) today announced it will scrap its housing investor loan cap.
The limit of investor lending growth to no more than 10 per cent was imposed in 2014 in order to cool the Sydney and Melbourne housing markets.
Now, believing the job has been done, APRA will discontinue the cap as of 1 July, 2018, as announced in a letter by APRA chairman Wayne Byres.
"There has been a clear reduction in higher risk lending, with investor loan growth moderating, interest-only lending declining and high loan-to-valuation lending also markedly lower," Mr Byres said.
"There have also been improvements in lending policies, increasing the rigour of serviceability assessments for new borrowers. Accompanying this, there has been an uplift in capital resilience, as the industry makes progress towards the 'unquestionably strong' targets announced by APRA in mid-2017."
The winners will be property investors, who could benefit from a lowering of interest rates on investment loans, according to comparison site Mozo's property spokesman Steve Jovcevski.
"We're expecting banks that may have previously shelved their investor loan business to keep within the growth limit, to start actively pursuing investors again with huge interest rate discounts," Mr Jovcevski said.
"Already, we've seen lenders begin to take the knife to investor home loan rates as well as loosen up lending requirements over the last few months. APRA's decision is likely to intensify this competition between the banks for a healthy investor loans book. The result is the gap between owner occupiers and investor rates especially for principal and interest borrowers is likely to get smaller and smaller."
Mozo found 26 lenders had already cut rates for investors on principal and interest loans in 2018.
The news is not so good for first home buyers, whose main competition comes from investors at the more affordable end of the market, but the added competition is likely to put a stop to predicted price falls in parts of Sydney and Melbourne this year.
Mr Jovcevski also predicted a softening later this year of APRA's additional 30 per cent cap on interest only lending, which was applied in March, 2017.