Loans Take A Hair Cut

LVRs COMING DOWN

After months of speculation, it eventually had to happen. It appears some of the banks are starting to nibble away at loan to valuation ratios. It’s not dramatic (at the moment) but it could be an indication of what’s ahead for some property buyers.
In the past week we have heard reports of a lender unofficially cutting back the maximum LVR by about 5 per cent. This obviously ties up more capital in the deposit but in most cases it shouldn’t have a great impact on the investment decision.
However, it does signal that lenders are belatedly taking heed of the warnings by the Reserve Bank and APRA, the prudential regulator. They have both been concerned that many banks are overly reliant on property loans and, as the latest analysis also shows, the big banks in particular have had a huge appetite for investment loans recently. Almost all the big four banks increased their investment lending by more than the 10 per cent maximum set by APRA during the past year. This might prompt APRA to take more formal measures to temper this type of lending.

Until next week,

Jock Bing