Why have banks started to increase interest rates?

You may have seen that in recent weeks many banks have started to lift interest rates on investment loans. It might seem a strange thing to do while the official cash rates is so low, but there’s a reason for it. Here’s everything you need to know.

What’s happening?

Many lenders including major banks such as ANZ, Commonwealth Bank and NAB have announced an interest rate rise on investor loans.

For some time there has been a lot of talk around a ‘bubble’ in property prices – particularly in Sydney real estate – and the regulators are more and more concerned about these price increases.

The Australian Prudential Regulation Authority (APRA) showed particular concern around investor lending. The regulating body recently implemented a cap on investment lending portfolios, asking banks to restrict growth in their investor lending portfolios to 10 per cent annually.

It’s this restriction that the banks are attributing the rises to their investment loan interest rates to.

Who does it affect?

As the bank’s stated, the rate rises are targeted at investment lending. The changes will affect first-home investors and potentially self managed superannuation funds that are looking at property investment. Owner occupier loans should remain unaffected by the changes.

Homeowners can take advantage of the current lending environment. There’s never been a better time to shop around for more competitive interest rates and home loan packages.

You’d be surprised what a home loan health check could do for you. It’s still possible to find more competitive loan options whether you’re a property investor or owner occupier.

Speaking to a mortgage broker means that all the hard work is done for you. We’re in changing times and the sooner you act, the more likely you are to benefit from a loan review.

Sourced: www.loanmarket.com.au/news