More and more people in Australia are opting to invest in property, mainly encouraged by the low interest rates and the instability of the global financial market.
According to ABS figures, investor loans touched a record high of $11.1 billion during April 2015. In fact, the mortgage market in Australia is comprised of 29% investors using residential property to generate returns.
Fearing a housing bubble, APRA has decided to tighten the noose on loans provided by banks to the investors. It has asked the banks to not increase their investor lending by more than 10% annually.
Heeding to the call, the big 4 banks in Australia have come down heavily on the property investors in terms of increased interest rates and slicing off discounts offered previously.
Until recently, investors could claim 100 per cent LVR loans. However, the Commonwealth Bank of Australia has now set the limit to 80% while the others hover around 85%. The Big 4 have also declared stricter measures to determine the repayment capacity of the investors. ANZ has even put a stop on discretionary rates offered to investors.
Recording a mixed response to its guidelines, APRA statistics show that although CBA and Westpac were just below the threshold of 10% in terms of YoY growth, ANZ and NAB recorded growth of 11.6% and 14.1% respectively.
As an investor in this period of turmoil, it is time for some introspection:
1. Are high interest rates my only option?
No, not at all! Since investing in property is a popular option, you must spend some quality time before finalising your lender in order to maximize the returns. While the big banks are scraping off the benefits available to investors and increasing the interest rates, the mortgage market is full of endless possibilities.
Search for the best investment property mortgages and conveniently compare weekly home loan deals on HashChing
2. Fatter deposits?
Considering that the Big 4 have decided to cap the loans to approximately 80% of the purchase price, it definitely translates to hefty deposits if you are borrowing from them. Understanding your concern, HashChing saves you the sweat by helping you choose from numerous other lenders offering better rates and deals.
3. What about increased taxes?
You could still save on taxes by claiming property depreciation. Most investors do not claim full depreciation without realising that depreciation tax benefits could sum up to more than 50% of the total price of the property. Our team of expert mortgage brokers can advise you to affect maximum savings and tax benefits on your investment property for no charge at all.