Keeping your eye on the ball

Keeping one's eye on the ball has been quite topical this week - apparently it is not something we Australians are good at when holding a cricket bat.  Well, I have just returned from 4 weeks holiday overseas.  Fortunately, I was not present at Trent Bridge but there were some more significant shifts in the loanscape bowling through during the last week of July.   Look what happened while my back was turned!  

All the major banks have announced significant increases to interest rates for property investors.  What's more they are not just applying this to new borrowers but are applying the same rate increases to existing borrowers too.  To give you an idea of the impact that is adding about $90 per month to the borrowing costs on a $400,000 loan.

This is a further consequence of APRA putting pressure on the banks to set aside higher amounts of capital to fund their loan books to keep the Australia banking system in the top quartile of banks globally.  The slug on existing borrowers is controversial but collectively the banks have to raise about $28 billion in capital to meet the benchmarks set out in the Murray inquiry into the Australian financial system.  They are looking to source these funds from several sources including shareholders (capital raisings) and also making assets sales. It is expected that investor loans will be allocated a higher risk rating meaning more capital has to be set aside for an investor loan compared with the same size loan to an owner occupier.

Now before everyone rushes off to refinance (and I know some brokers get a Pavlovian reaction when this type of change rolls through), take a look at the table below.  You will see that most lenders are pretty much moving by the same amount.  And just because Lender X has not yet increased rates for existing borrowers, that does not mean that they will not do it next week or next month! 

New Loans

LenderDate Appl.Max. LVRInterest only loansInvestment Loans
AMP Bank29 Jul 150%-investor loans withdrawn
ANZ Bank10 Aug 1590%-+0.27%
CBA31 Jul 1595%-+0.27%
Choicelend10 Aug 1590% (incl. LMI)+0.29%-
ING DIRECT31 Jul 1580%variesvaries
Macquarie3 Aug 1590% (incl.LMI)-+0.27%
ME Bank20 Jul 1595% (incl. LMI)-+0.15%
NAB10 Aug 1590%+0.29%-
Suncorp31 Aug 1595% (incl. LMI)-+0.27%
Westpac10 Aug 1580%-+0.27%

Created with the HTML Table Generator

Existing Loans 

LenderDate Appl.Max. LVRInterest only loansInvestment Loans
AMP Bank7 Sep 15--+0.47%
ANZ Bank10 Aug 15--+0.27%
CBA10 Aug 15--+0.27%
Choicelend10 Sep 15-+0.29%-
ING DIRECTno change-no changeno change
Macquarie10 Aug 15--+0.27%
ME Bankno change--+0.15%
NAB10 Sep 15-+0.29%-
Suncorp31 Aug 15--+0.27%
Westpac25 Sep 15--+0.27%

Created with the HTML Table Generator

Data in tables correct as at 8 August 2015

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