Westpac is enforcing stricter lending conditions on investment property loans, the third change to its mortgage products in three months. Westpac and other lenders have been tightening lending conditions and special discount rates because of growing regulatory pressure to clamp down on interest-only products.
Sydney-headquartered Westpac is reducing the maximum allowable interest-only term for investment property loans to 10 years. Previously, the interest-only term could be extended to 15 years. Additionally, the 12-year fixed rate investment property loan and its low documentation equivalent will no longer be available. These changes apply to all special borrower packages as well.
Rate rises, mortgage withdrawals, higher costs, and tougher conditions have been announced since July when lenders inundated the property market with fixed rate home loans to boost the weakening demand caused by a slump in overseas and first-time home buyers.
According to Christopher Foster-Ramsay, principal finance broker at Foster Ramsay Finance, some lenders have “stopped aggressively going for market share” during the past six weeks by trimming margin discounts and tightening terms and conditions.
APRA’s latest monthly banking statistics to the end of August indicate that the total lending for housing rose about 0.5%. This is equivalent to an annualised rate of 6.4%, which is well ahead of inflation and wage growth.
Meanwhile, owner-occupied loans rose about 6% (or $6 billion), and investment loans rose about 0.35% (or $1.8 billion). Investment loans comprise about 35% of loan books.
Regulators are pressuring lenders to tighten interest-only loans because of growing concerns that borrowers might have problems repaying the principal, particularly if there is a sharp market correction. Lenders are under less pressure to build term deposits because of recent regulatory changes easing liquidity requirements.
With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now