All of the major banks have now increased their standard variable home loan rates. This comes on top of a recent increase to all investment loans held by each of the banks.
The most recent increase is a direct result of APRA (Australian Prudential Regulatory Authority) changes which requires banks to hold more deposits, as a percentage of its lending, and hence the cost of funds. These changes have been initiated to strengthen the banking sector, to “weather proof” the domestic economy from future adverse effects as a result of global economic downturn. Remember, that even though the Australian economy and Stock Market was hit hard during and after the 2008 Global Financial Crises, it was our strong banking sector that shielded us from much of the pain the rest of the world endured.
The increase to all investment loans was also in relation to APRA changes. APRA have instructed all Australian banks that they are not permitted to increase their Investment Mortgages Portfolio by more than 10% in this 12 month period. This was initiated to cool the property markets in big market places such as Sydney and Melbourne, as APRA saw that it was the investor market who were pushing up property prices in these areas. Many banks were on target to increase their portfolios by more 30%. So in response the banks have increased their investment loan mortgage rates and “toughened” their credit policies on investment loan applications to stem the flow of investment loans to their clients.
It’s not all doom and gloom however. We at Your Corner believe that there is a good probability that the reserve bank will decrease the cash rate in the November meeting, in an effort to combat the above issues.
For those of you that have seen your mortgage interest rate increased by your bank (who are regulated by APRA) can contact us at Your Corner, as we have many lenders who are regulated by ASIC rather than APRA, which means they have not had to increase their mortgage rates. Some clients have already been set up to save over $200 000 on future interest repayments on their loans.
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