The recent raises announced by some of the major banks affect the interest only and investor loan rates. Other banks seem likely to follow with out-of-cycle rate rises according to the Financial Review. “Analysts said the major lenders were jacking up investment lending rates in a "pre-emptive" move as regulators readied to impose another round of "macro-prudential" policies aimed at managing the risks posed to financial stability by a rampant property market.”
Back in late 2014 the APRA (Australian Prudential Regulation Authority) ordered the banks to reduce the proportion of loans going to investors. The response was that banks offered lower interest rates to owner occupier borrowers and imposed a higher rate for investor loans.
This measure went some way to rebalancing the market at the time. However, Recent comments by the Reserve bank assistant governor Michelle Bullock indicated that regulators were “prepared to do more if needed” as the effectiveness of the prudential measures were beginning to fade.
Bullock reflects that, “We need to spend time analysing them and thinking about whether policy responses might be required. We are still learning how best to do this.” This leaves us to ponder exactly what regulatory or policy changes may come in the future.
What does this mean for potential investors? The answer is simple: shop around thoroughly and do your sums before committing to an investment home loan. For current investors feeling the pinch the answer is less certain. Do you get out now before there’s a glut of property hitting the market? Or hold tight? While no-one has a crystal ball, it would be worthwhile to have a chat with your local real estate agent; someone who has experience and a close eye on the market trends in your area.