The sands beneath the feet of investors are shifting as mortgage lending practices continue to change on a weekly basis. Whether the RBA sends interest rates higher or not is no longer the only factor to what happens to your mortgage, as the big banks are now far more strategic in this regard. Here is what you need to know about how changing mortgage lending practices impacts on you, and how you can fight back and beat the banks.
The big four banks are specifically altering their policies for one group in particular: property investors.
All of the four major banks increased their interest rates on interest only loans in June. And additionally, when it comes to investor based loans, Bankwest reportedly raised rates by 40 basis points, and the Commonwealth Bank Of Australia, which is the countries biggest mortgage lender, are doubling the minimum deposit requirements from 5% to 10% of the value of the requested loan.
The Sydney Morning Herald recently reported that leading financial analysts Morgan Stanley believe that these changes will result in potentially $900 million in additional profits for the big four banks.
The larger issue here is that the Reserve Bank of Australia clearly does not need to raise the rates to control the property market. The lenders are being forced into action by regulating lending practices to a certain group, and in this case it is property investors.
It is obvious that the regulatory entities have some concern about the recent growth of interest-only investor loans. What remains to be seen is whether these new measures will actually work.
Analysts say these rule changes may not have a large impact on lending to investors as this group has access to a tax deduction on interest payments. However, owner occupiers do not receive such a benefit if they are currently using an interest only loan for their principal place of residence. This makes them a slightly riskier customer than their investing counterparts. Not to mention that the investors will have a tenant paying rent and doing the heavy lifting for them.
Regardless of the future outcome, what is clear is that it is more difficult for the every day investor to get the very best results when it comes to lending. Now more than ever it’s crucial that you have an experienced professional on your team who understands the lending terrain working for you. Property investing is changing at a rapid rate, and our only defence is to empower ourselves with the right team in order to adapt along with it.
At our next complimentary live event I will take a look into how our team are helming investors locate high yielding properties with a strong history of capital growth that actually pay you for owning them. Our last two events sold out so with limited seats available please don’t delay and register using the link below now.