CBA told mortgage brokers it would be suspending inwards refinancing for property investor loans and would be reducing its investment property lending package discount. CBA’s $1,250 rebate on investment loan refinancing will also be eliminated.
While CBA has not exceeded the Australian Prudential Regulation Authority’s (APRA) annual growth limit of 10% on investment lending, the latest changes suggests the bank may be close to breaching it. Moreover, as the freeze only affects inwards refinancing, customers who already have a CBA loan will still be able to refinance.
APRA’s speed limit was introduced in 2014 in an attempt to restrain rampant investor lending and surging house prices in the capital cities. After two rate cuts by the Reserve Bank and Labor’s failure to gain office on the back of a pledge to slash negative gearing tax breaks, there has been renewed growth in the rate of investor lending in recent months.
CBA controls about a quarter of the housing loan market and has $137.2bn worth of investor loans on its books.
Investor lending growth, which was rising at an annual rate of more than 10% until September 2015, slowed to 4.5% in August following APRA’s crackdown.
“We are committed to consistently delivering the best customer experience for home buyers, upholding the highest level of professional standards, and meeting our responsible lending and regulatory obligations,” the bank said in a recent note disseminated to mortgage brokers.
CBA’s changes follow an industry-wide move to hike mortgage rates on investor loans and other products since the election of Donald Trump as US president. These rate hikes coincide with a surge in bond yields and wild fluctuations in the commodity and currency markets, which in turn has pushed up the cost of funding for local lenders.
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