First-time home buyers saving for a deposit hit hard by interest rates… Investor tightening will strengthen our banks, says ratings agency...
Interest rates hurting first-time homebuyers
The banks might make up to $400 million a year by raising interest rates on home loans, but it would come as a hard blow to first-time home buyers saving for a deposit, according to an International Business Times article.
The ANZ Bank Group last week announced that it is planning to limit lending to landlords by raising the index rate by 0.27 per cent to 5.56 per cent on the investor's loan.
The move by ANZ would add another $40 to a monthly payment of $300,000 on mortgages. The Commonwealth Bank of Australia (CBA) followed suit the very next day and the National Australia Bank (NAB) on Monday also raised its interest-only home loans by 0.29 per cent.
Andrew Wilson, senior economist of the Domain Group, said that tenants are soon going to feel over burdened with the hefty monthly payments, particularly in Sydney which faces a chronic shortage of properties, and Melbourne where only two per cent of the houses are vacant and the average rent for properties are already high.
Domain reported that Wilson, however, expects Perth to be the least affected city as it has the highest vacancy rate at three per cent.
"Certainly for landlords that are in areas which are popular, it gives them the opportunity to push rents up," Wilson said. "If they can't, they'll absorb it, but if they can, it will become part of the factor that drives up rents in areas where there are higher demand for rental properties."
Investor tightening will strengthen our banks, says ratings agency
The major banks’ move to reprice their residential investor loans and curb investor lending is credit positive, according to a global ratings agency. Increased lending rates are credit positive for the banks, according to Moody’s, because they rebalance the banks’ portfolios away from the higher-risk investor and interest-only lending toward safer owner-occupied and principal and interest loans.
Moody’s also says that the major banks’ tightening of investor loans also helps to preserve net interest margins and profitability amid higher capital requirements and increased competition from smaller lenders.
An analysis conducted by Moody’s revealed that although investment and interest-only loans performed well during the global financial crisis of 2007-10, they inherently carry higher default probabilities, which means higher delinquencies for Australian banks at times of stress.
The banks might make up to $400 million a year by raising interest rates on home loans, but it would come as a hard blow to first-time home buyers saving for a deposit, according to an International Business Times article.
The ANZ Bank Group last week announced that it is planning to limit lending to landlords by raising the index rate by 0.27 per cent to 5.56 per cent on the investor's loan.
The move by ANZ would add another $40 to a monthly payment of $300,000 on mortgages. The Commonwealth Bank of Australia (CBA) followed suit the very next day and the National Australia Bank (NAB) on Monday also raised its interest-only home loans by 0.29 per cent.
Andrew Wilson, senior economist of the Domain Group, said that tenants are soon going to feel over burdened with the hefty monthly payments, particularly in Sydney which faces a chronic shortage of properties, and Melbourne where only two per cent of the houses are vacant and the average rent for properties are already high.
Domain reported that Wilson, however, expects Perth to be the least affected city as it has the highest vacancy rate at three per cent.
"Certainly for landlords that are in areas which are popular, it gives them the opportunity to push rents up," Wilson said. "If they can't, they'll absorb it, but if they can, it will become part of the factor that drives up rents in areas where there are higher demand for rental properties."
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Investor tightening will strengthen our banks, says ratings agency
The major banks’ move to reprice their residential investor loans and curb investor lending is credit positive, according to a global ratings agency. Increased lending rates are credit positive for the banks, according to Moody’s, because they rebalance the banks’ portfolios away from the higher-risk investor and interest-only lending toward safer owner-occupied and principal and interest loans.
Moody’s also says that the major banks’ tightening of investor loans also helps to preserve net interest margins and profitability amid higher capital requirements and increased competition from smaller lenders.
An analysis conducted by Moody’s revealed that although investment and interest-only loans performed well during the global financial crisis of 2007-10, they inherently carry higher default probabilities, which means higher delinquencies for Australian banks at times of stress.
In depth: What the top 5 banks think about investor lending
MPA asked the top performers in our Brokers on Banks survey about the impact of investor lending restrictions
MPA asked the top performers in our Brokers on Banks survey about the impact of investor lending restrictions
