(Australian Associated Press)
Tighter lending standards for investors are hurting first-time buyers trying to get on the property ladder.
Banks are turning investors away amid a banking regulator crackdown on risky mortgage lending but the measures are also making it harder for anyone looking to buy an investment property as their first step into the housing market.
Mortgage broker Mortgage Choice has already experienced a drop in investment approval volumes, from 34 per cent to 29 per cent – a 20-month low – in June alone.
“Unfortunately, I think the vast majority of those people would be first-time investors, first-time buyers,” Mortgage Choice spokesperson Jessica Darnbrough said on Wednesday.
“They’re the people that are going to be affected the most. Not those people who tend to have multiple properties that they can leverage against and higher incomes that they can use to prove servicing.
“It’s going to be those people who are looking to get onto the property ladder and are choosing an investment path to go down in the first instance because they can’t afford to buy where they want to live.”
The Australian Prudential Regulation Authority wrote to lenders in December highlighting higher risk mortgage lending, amid an ongoing surge in investor housing activity on the back of record low interest rates and strong home value gains.
Australian Bankers’ Association chief executive Steven Munchenberg said the banks understood what the APRA was trying to achieve but were having to turn customers away.
“At the end of the day, the banks accept that APRA and the Reserve Bank want to make sure that low interest rate isn’t creating any asset inflation which could cause problems later on. But at the same time, it does have an impact on investors who may well be wanting to get in the market,” Mr Munchenberg said.
“Investors aren’t just people who have got a lot of money or wealth to invest,” he added.
Lenders began to tighten their investment lending criteria in May, including removing investor interest rate discounts.
Westpac last week imposed an 80 per cent loan-to-valuation ratio cap on investment loans, meaning new property investors need a deposit of at least 20 per cent.
Ms Darnbrough said the investors being hit hardest by the investment lending changes were first-time buyers and/or mums and dads who may only have an owner-occupied property but are looking to buy their first investment property.
“We haven’t seen it impact those seasoned investors,” she said.
“If they’ve got other properties that they can leverage off then the LVR hurdles aren’t going to stop them but if you don’t own a property then the deposit that you need to purchase an investment has now gone up.”
Ms Darnbrough said other across-the-board changes were also having an impact on owner occupiers and first home buyers in particular, with lenders increasing floor rates they assess borrowers against and changing how they calculate a borrower’s ability to service the loan.