Major Lender Stops Investment Loans

personOtto Dargan access_timeSeptember 1, 2017

Should investors be afraid?

One of Australia’s largest non-banks, Heritage Bank, announced today that it would no longer be accepting new investment loan applications, effective immediately.

So what does it mean if you already have an investment loan with Heritage? Will other lenders pull out of investment loans?

What does this mean for current Heritage customers?

Current Heritage Bank customers who have an variable rate investment loan will not be affected by the temporary freeze on investor lending.

However, fixed interest rate customers who are about to come to the end of their term will need to refinance with another lender.

It’s important also to note that Heritage stated that they would permanently changing their guarantor loan policy to no longer accept investors.

We have nearly 40 lenders to choose from on our panel and many of them are still offering investment loans.

Please call us on 1300 889 743 or complete our online enquiry form to discuss your options with one of our experienced mortgage brokers.

Why did they put the breaks on?

The news comes as the banking regulator, the Australian Prudential Regulation Authority (APRA), continues to turn the screws on investment lending and especially interest only loans.

Since July, banks have since been forced to limit approvals and lift interest rates signficantly on investment loans in order to keep up with these lending caps.

“In most cases, banks can make pricing changes which keep their volume down but, if they’re caught out, then they have to stop lending to investors altogether,” Home Loan Experts managing director Otto Dargan said.

“Unfortunately, this have a big negative impact on smaller lenders like Heritage Bank and their customers.”

Larger banks are struggling too!

AMP recently announced that they will only allow investors to borrow up to 50% of the property value (Loan to Value Ratio or LVR) compared to the 90-95% that was acceptable in the past.

MyState dropped their LVR to 60% while Newcastle Permanent just came back into investor lending at 80% LVR.

All of this means you’ll need to come up with a bigger deposit.

“The major banks are constantly shifting their policy and pricing to meet APRA’s requirements,” Otto said.

What does this mean for investment loans going forward?

It’s hard to say but it’s likely more lenders will at least temporarily stop investment lending so they can stay within APRA’s investment caps.

If you currently have an investment loan or you’re looking to borrow in the near future, please get in touch.

Call us on 1300 889 743 or fill in our online enquiry form and we can give you some options based on your current situation.

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