It’s getting tougher for investors due to pressure from government regulator, the Australian Prudential Regulatory Authority (APRA). But there are ways that you can stay ahead of the game as things get tougher.
APRA has told the banks that it wants them to rein in the growth in their investment lending. As a result, many banks are now increasing their interest rates by 0.27 per cent for investment loans. The hope is that this will calm down some of the activity perceived to be creating froth in the property market.
And with the June Housing Finance Data from the ABS showing $13.7bn (52.8 per cent of all loans) written in the month being for investment purposes, the chances are that the banks will respond again to make life tougher for investors.
There are two things that investors can do to stay ahead of these tough changes.
For your current investment property, you may want to fix all or part of your loan. Some lenders recently dropped their fixed rates slightly – so it is worth a look. If you have locked in a fixed rate while investor variable rates go up, you could be quids in.
If you are looking to buy an investment property, have plenty of equity in your own home and a good income, you may want to borrow against your owner-occupied property. Some, but not all lenders will allow you to take cash out via a mortgage and leave it there until you purchase the investment property. I recently arranged for a client to access $550,000 in home equity. This money is now waiting in their offset account until they purchase their next investment property.
The government is going to make it tougher for investors – which of us doesn’t want to get one over the government?
National Client Finance Manager
Disclaimer: This article contains general information. Before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs.