Finally, some good news for property investors!
In 2014 APRA (The Australian Prudential Regulation Authority) restricted the investment loan portfolios of banks to 10% in an attempt to slow the investment property growth, particularly in Sydney.
Well, it worked and property investors found it increasingly difficult to secure funding as the banks changed their credit policies. The oversupply of apartments in Sydney made APRA very nervous, and we saw credit policies become restrictive, foreign borrowers pushed out and even certain suburbs blacklisted from lending.
According to a report in the Australian Financial Review, APRA chairman Wayne Byres said that investor lending growth is down on the imposed 10% cap, currently near 5%. He also indicated that they see no need to adjust the current cap. Good news for property investors!
Property bubble pierced, not popped
By removing a large proportion of investors from the market, demand for property drops and with less buyers, property prices start to decline. Restricting lending to property investors has essentially pierced the property bubble and started to deflate it, but it hasn’t popped.
Property investors may see lending criteria start to ease
If the banks are well under their 10% cap, in theory they have the capacity to re-enter the investor market and increase the number of borrowers in their investment portfolio.
The recent interest rate drops have certainly enticed buyers back into the market but as a Mortgage Broker, we’re still seeing some borrowers struggle to fit within the restricted credit policies with the major banks
We’re hoping that credit policies with the major banks will relax as they review the investor portfolios and push the boundaries of their caps.
Non-bank lenders a solution for property investors
Excluded from this 10% cap on investor lending are the 2nd tier and non-bank lenders. Their size and proportion of the overall banking sector means they escape the restrictions of APRA for now. That means, they are still happily supporting property investors, without setting more difficult credit policy restrictions.
Want to learn more about 2nd tier investors? Read our article Big Banks vs 2nd Tier Lenders for home loans.
Housing market unlikely to crash
The National Australia Bank (NAB) has indicated that they believe housing markets will cool over the next one to two years but they are confident there won’t be a crash. NAB global head of research, Peter Jolly, added that in some parts of Melbourne, Brisbane, and Sydney, there has also been a decline in the unit markets where there was a very clear oversupply.
How can property investors secure finance?
Property investors in Sydney are still able to securing property investment funding. The options are just a little more restrictive now. Prior to the APRA changes, property investors were able to pick and choose which financial institution they wanted, now they have a smaller range to choose from.
2nd tier lenders and non-bank lenders are becoming a very real option for property investors. Investors should consider all lenders as the major banks become a less viable option for many. Mortgage broker Mint Equity has access to 100’s of product options for property investors that provide flexible lending criteria at affordable interest rates.
The experience of a trusted mortgage broker such as Mint Equity will enable property investors to structure your loan application to achieve the most favourable outcome.