The APRA (Australian Prudential Regulatory Association) has announced that they are cracking down on investment lending in an attempt to slow the rise of property prices.
The decision comes amid concerns over the Sydney and Melbourne housing price bubble.
Investment lending has been steadily on the rise and currently makes up 50% of the mortgage industry in Australia, a figure that is now expected to slow as with APRA’s decision to introduce a 10% cap on investment lending.
The cap was initiated in an attempt to steady the growth of the housing market- in Sydney and Melbourne specifically. This is expected to taper the enthusiasm of buyers who are willing to jump on the investment bandwagon with interest rates at an all time low 2.25% thanks to the RBA.
It is anticipated that the move will encourage ADI’s (Authorised Deposit taking Institutions) to reinforce sound mortgage lending practices.
Here’s what you can expect:
- Borrowers can expect to have to prove repayment capacity for up to 2% increase on current lending.
- Housing price growth to slow down.
- Stricter regulations imposed by lenders for those taking out mortgages for investment properties.
- A smaller amount of investment loans being approved.
For those considering purchasing an investment property it’s important to do your research and make an informed decision. Be wary of acting impulsively while rates are low – wise investors will assess the market dynamics and make investment decisions based on sound research and judgement.
To speak to an expert today about your home loan – make a free enquiry – www.switchmyloan.com.au or speak to one of our lending experts on 1300 307 155.