Do The New Lending Rules Affect You?

You may have heard that banks and other lenders have been required to implement new lending rules to reduce their lending to property investors. What’s the real story and has this changed how much you can borrow?

The Australian Prudential Regulation Authority (APRA) is our financial watchdog and keeps our financial system secure by overseeing all it’s participants. With the serious increase in investment borrowing in Sydney and Melbourne, APRA had concerns people would extend themselves too far.

New Lending Rules Affect Loans

New Lending Rules Affect Loans

Future economic changes could affect any over-extended investors and the broader housing market if many were pressured into forced sales. This would be most likely to happen due to financial hardship caused by unemployment or rising interest rates.

To put the brakes on this lending, APRA has restricted the number of loans banks can advance. It has been up to the banks how they will reduce lending, so most have stopped discounting investment loans or increased the deposit required. Both measures will weed out marginal borrowers but most investors will be fine to proceed.

With the large number of lenders available through a good finance broker, there is usually a solution for every borrower and many times our clients find they can borrow more easily than they thought. This is because rental income is so high in Qld that the tenant’s rent (and depreciation allowances) cover the loan repayments in most cases.

Our trusted finance broking partner is Finance Options. They always ensure our property buyers can service their loans by reviewing their living expenses, allowing for interest rate rises and leaving a cash buffer where possible.

If you’re thinking of buying or refinancing, talk to us first.  Just call us on 1800 767 332 or go to iphq.com.au. We’re always happy to help.

July 2015