Banking News

CBA, ANZ raise residential property investor loan interest rates

(28 July 2015 – Australia) The Commonwealth Bank of Australia (CBA) and ANZ Bank both took further steps to moderate investor home loan growth by increasing their rates on investor home loans.

CBA said its efforts to address the Australian Prudential Regulation Authority (APRA)’s concerns regarding investment home lending growth have led to an increase of 27 basis points to investor home loans to 5.72 percent.

Fixed rates for one, two, three, four and five-year new investor home loans will also increase by between 10 and 40 basis points.

There are no increases to the SVR on owner occupied loans and fixed rates for some owner occupied loans have been reduced.

CBA said demand for investor home loans across Australia had reached historic highs, with recent data noting that over 50 percent of new home loan approvals are for investment purposes.

Last December, APRA introduced new regulatory measures to reinforce sound residential lending practices, including actions to restrict investor lending growth to no more than 10 percent p.a.

Matt Comyn, Group executive for Retail Banking Services said: “As Australia’s largest home lender, we support the prudential regulator’s actions to ensure lending practices remain sustainable and we have been actively managing our investment home loan portfolio to remain below the 10 percent growth limit.

"Despite making a range of changes to our investor lending policies in the past few months we have witnessed ongoing investor lending growth, and at an industry level, investor lending approvals remain 22 percent higher than 12 months ago."

These fixed rate changes came into effect from 22 July 2015.

"In the current market conditions, we believe these changes strike an appropriate balance in our portfolio between owner occupied home loans and those seeking investment loans," Comyn said.

ANZ also announced an increase on interest rates for residential investment property loans will increase to manage investor lending growth targets and in response to changing market conditions.

The bank said there is no change to other variable lending rates including the Standard Variable Rate for owner-occupied home loans or for business lending.

Fixed rates for new owner-occupied home lending will be reduced by up to 40 basis points.

Effective Monday, 10 August 2015, ANZ’s variable Residential Investment Property Loan (RIPL) Index Rate will rise by 27 basis points to 5.65 percent.

Fixed rates for new Residential Investment Lending will also increase by up to 30 basis points.

ANZ chief executive Australia Mark Whelan said: “Although interest rates for residential property investors are at very low levels historically, the decision to raise interest rates for residential investment lending has been difficult but necessary in the current environment.

“It allows us to balance the mix of our lending between owner-occupied and investment lending as well as the impact of changing market conditions.

“This includes a decision to cut fixed rates for new owner-occupied home lending.

“This is a considered decision that takes into account our customers’ position and the criteria we look at when setting rates including our competitive position, our regulatory obligations and the state of the residential property market,” Whelan said.

ANZ has also introduced a series of other measures recently to improve the mix between investor and owner occupied lending.

For residential investment lending, these include reducing interest rate discounts, increasing the deposit required to at least 10 percent and increasing interest rate sensitivity buffers.