Changes to investment lending attempt to slow growth
There are changes afoot in the finance industry related to investment lending. Since late June, the governing bodies have been placing pressure on the banks related the growth of their investment portfolios, urging them to incorporate recommended changes in order to slow down their growth.
Even though you would imagine growth to be the aim of the game, it’s not always in everyone’s best interest.
There are a few changes that have been filtering in recently, the first being related to the Loan to Value Ratio (LVR). The LVR is the proportion of money you borrow compared to the value of the property you’re buying. A lender will look at your LVR before agreeing to the loan, working out
if you are a risk. The higher your LVR, the more of a potential risk are to your lender. This is different across all banks - some banks will now no longer lend above 80% for investment, where some other bank are still lending 97%. A broker can advise which lenders are the most appropriate for your situation related to LVR.
Interest Rates are another hot area right now. The majority of the banks have now introduced a different interest rates for investment lending compared to owner occupied lending. One of the bigger changes in this space is that some lenders rate increase is not just impacting new lending
moving forward, but will also impact their existing lending too.
Discovering your borrowing capacity is an important first step in the home loan process. Your borrowing capacity is an indication of how much you may be able to borrow based on factors like your income and existing investments. The majority of lenders have recently actioned multiple changes in how they asses a client’s borrowing power.
If you’re unsure of the home loan process or have any questions related to the recent changes, a broker can help. These changes are great example of the benefit of utilising a broker when it comes to sourcing finance – our brokers at Loan Market Bendigo are intimately aware of
the legislation and regulations around lending and can help find the right loan for your situation.