Property investors should get used to paying increasingly higher interest rates compared to people paying off a loan on a house they live in. In the last two weeks, all four big banks have targeted property investors with interest rate rises of between 0.27 and 0.29 percentage points, moves they have blamed on rules that restrict growth in lending to landlords.
It comes on top of moves in May 2015 to scrap or cut lucrative interest rate discounts for investors taking out new loans.
Taken together, these two trends have opened up a two-tier mortgage market, something that was the norm with some banks until the late 1990s.
Many investors are paying interest rates that are anywhere between 0.27 and 0.6 percentage points higher than those charged to owner-occupiers, depending on the bank.
The predictions this gap may widen in months to come, as banks respond to the Australian Prudential Regulation Authority's demand that housing investor loan growth slow to less than 10 per cent a year.
Further increases in banks' interest rates for property investors are expected as banks are trying to avoid being the cheapest lender for investor loans, which would risk leading to an influx of customers. It is expected that interest rates for most investor loans are likely to be 0.4 percentage points to 0.9 percentage higher than rates for owner occupied loans by the end of this year.
The recent rate rises also come as some investors question the outlook for profit growth, with listed investment company Argo Investments saying it would be hard for bank share prices to rise much over the next 12 to 18 months.
During the three months to June, Commonwealth Bank, ANZ and NAB all expanded in housing investor lending at a quicker annualized pace than APRA's 10 per cent a year limit, Goldman Sachs analysts said on Monday.
There is currently a global debate among regulators about whether investor property loans are riskier for banks, and should therefore attract tougher capital buffers.
The general con-censors be you could see a 70 to 80 basis point gap between owner-occupier and investor as we move forward into the next year," he said.
With banks' growth in the investor market restricted, there is also likely to be growing competition for owner-occupier customers. This is already evident, with the major banks slicing fixed interest rates for these borrowers.
However you will notice further tightening of banks' credit policies.
"Many of Australia's lenders have made some sweeping adjustments to their lending policy in recent weeks and it is expected that we will see more changes moving forward.
It comes on top of moves in May 2015 to scrap or cut lucrative interest rate discounts for investors taking out new loans.
Taken together, these two trends have opened up a two-tier mortgage market, something that was the norm with some banks until the late 1990s.
Many investors are paying interest rates that are anywhere between 0.27 and 0.6 percentage points higher than those charged to owner-occupiers, depending on the bank.
The predictions this gap may widen in months to come, as banks respond to the Australian Prudential Regulation Authority's demand that housing investor loan growth slow to less than 10 per cent a year.
Further increases in banks' interest rates for property investors are expected as banks are trying to avoid being the cheapest lender for investor loans, which would risk leading to an influx of customers. It is expected that interest rates for most investor loans are likely to be 0.4 percentage points to 0.9 percentage higher than rates for owner occupied loans by the end of this year.
The recent rate rises also come as some investors question the outlook for profit growth, with listed investment company Argo Investments saying it would be hard for bank share prices to rise much over the next 12 to 18 months.
During the three months to June, Commonwealth Bank, ANZ and NAB all expanded in housing investor lending at a quicker annualized pace than APRA's 10 per cent a year limit, Goldman Sachs analysts said on Monday.
There is currently a global debate among regulators about whether investor property loans are riskier for banks, and should therefore attract tougher capital buffers.
The general con-censors be you could see a 70 to 80 basis point gap between owner-occupier and investor as we move forward into the next year," he said.
With banks' growth in the investor market restricted, there is also likely to be growing competition for owner-occupier customers. This is already evident, with the major banks slicing fixed interest rates for these borrowers.
However you will notice further tightening of banks' credit policies.
"Many of Australia's lenders have made some sweeping adjustments to their lending policy in recent weeks and it is expected that we will see more changes moving forward.
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