Lending changes still taking their toll on investors

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While changes to Australia’s investor lending market have been in force for some time now, it appears investors are still coming to grips with how to work around them.

According to broking franchise Mortgage Choice, the Australian Prudential Regulation Authority (APRA) mandated slowdown of investment lending has resulted in a significant portion of Australian’s altering their property investment decisions.

Results from Mortgage Choice’s latest annual investor survey have revealed that 33% of investors have changed their plans in response to the lending changes over the past year.

“Over the last 16 months, most of Australia’s lenders have been forced to tweak their policy and pricing in order to stem their level of investment lending growth,” Mortgage Choice chief executive John Flavell said.
 
“These changes have ranged from the removal of discretionary pricing on investment lending all the way through to loan to valuation restrictions. It would now appear as though this spate of changes are being felt by existing and potential investors, with many Australians actually deciding to put their property plans on the backburner,” Flavell said.

While not everybody has been put off by the changes, those that have continued with their investment decisions have had to show some patience, with 32% of respondents saying it has been difficult to obtain finance in the last 12 months.

Of those who said they have faced difficulties in obtaining finance, half were first time buyers, which Flavell said illustrated the difficulties faced by younger, inexperienced investors.

“These investors are young, they don’t have huge deposits or massive incomes and they realise that purchasing an investment property is the only conceivable way to get a foot onto the property ladder. Unfortunately, the harsh reality is these buyers are more susceptible to interest rate increases and changes in lending policy than others,” Flavell said.
 
“So while the recent price and policy changes have clearly reduced the overall level of investment lending, it would appear a lot of the impacted investors are first time buyers – those struggling to get a start. If this continues, I believe the gap between the ‘property haves’ and the ‘property have-nots’ will widen – especially if property values in markets like Sydney and Melbourne remain strong.”

First time investors accounted for 36.1% of all investors who obtained finance through Mortgage Choice in the past year.
 

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