Investors Face Hurdles
Investors have been warned that a failure to plan, may be a plan for failure with the major banks making sweeping changes to investment lending policy and pricing, according to RE/MAX Success Sales Consultant, Tiffany Krause.
The federal regulator Australian Prudential Regulation Authority (APRA) is currently implementing major unprecedented changes to the Australian mortgage industry. These include restricting the growth to 10% for the bank’s investment portfolio this year in a move designed to slow down the property market.
Miss Krause said that loyalty to your current banker may not be enough to get you over the line for a loan to purchase your next investment property. Some banks are already “maxed out” or almost at their limit to take on new business under the new regulations.
“We strongly recommend investors direct their borrowing enquiries to an independent professional qualified finance broker. This could avoid rejection, disappointment or embarrassment.”
Andrew Searle of Searle Financial Services confirmed the new regulations are a game changer for investors.
“I agree with APRA. It will make the 4 major banks stronger with increased capital requirements but with that comes higher borrowing costs and subsequently increased interest rates for investors. It’s now like a game of chess where the investor needs a strategic plan to access a new loan. By shopping around and knowing the policies of all banks, I am able to provide positive borrowing options by massaging and restructuring the deal to fit a particular bank’s policy,” Mr Searle reiterated.
“Interest rates for investment loans will increase around 25 to 30 basis points which will have some impact on the size of the loan. Our goal is to secure the investment loan on the best terms and conditions for each client’s circumstance.”
Mr Searle emphasised that first home buyers and owner occupiers would be the winners and now be in a stronger position to negotiate a lower interest rate as the banks chased their business in a very competitive environment.
RE/MAX Success Licensee, Katie Knight added that higher interest rates may lead to increased rents as investors seek to recover their additional costs.
“It seems unfair to investors in markets where there has been no boom but because APRA is a regulatory body it can’t discriminate against particular regions so we have to cop it on the chin.”
Miss Knight highlighted that rent increases are only sustainable based on supply and demand. REIQ statistics at 30th June 2015 revealed a vacancy rate of 3.1% for the Toowoomba region.
“Our large RE/MAX residential Property Management portfolio is currently well below that figure,” Miss Knight concluded.