Banks put brakes on investor lending

Banks are finally putting the brakes on lending to housing investors, implementing tougher policies that are expected to remove some of the heat from the booming housing market.

Under huge public and private pressure from regulators, the big banks are effectively raising interest rates for many new property investors by scrapping or scaling back discounts offered.

ANZ Bank said it would no longer offer discount interest rates to new property investors who did not already have a mortgage over their own home with the bank.
National Australia Bank and Commonwealth Bank have also reduced the discounts offered to new investor borrowers.
ING Direct has released new maximum lending parameters, with dramatic drops flagged for investors in New South Wales.
Heritage Bank has announced caps on investor loans as well as changes to how it applies the qualifying rate for all mortgage lending.

The industry is also considering a tougher stance on deposits, after Bankwest said investors will need to provide 20 per cent of the purchase price to receive the loan, and cut back on other special pricing deals for property investors.

Westpac has not changed its loan-to-valuation rules or announced changes to pricing, but this month it said it would apply tougher tests to new property investor borrowers when assessing how they would cope with higher interest rates.

The steps to slow growth may hit demand from property investors, who have underpinned a surge of nearly 15 per cent in Sydney house prices in the past year and contributed to higher prices in Melbourne and other desirable locations.

The changes are in response to a demand from the Australian Prudential Regulation Authority for banks to slow the pace of housing investor credit growth below 10 per cent.

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