AMP Bank has stopped lending to investors as mortgage brokers warn interest rate hikes for landlords could lock out first-time buyers but lead to further discounts for owner occupiers.
AMP Bank has hiked rates on its existing loans to landlords by 47 basis points, the biggest and latest lift by a lender as the industry moves to arrest growth in investment lending.
But unlike other lenders AMP Bank has decided to temporarily cease loans to new property investors in response to regulator concerns.
It will not take any new investor property loans until later in 2015, depending on market conditions.
“We appreciate the position this puts our customers in and will be working with our distribution network to actively communicate with them,” AMP Bank managing director Michael Lawrence said on Wednesday.
“Australia’s property market is experiencing high levels of investor property lending growth and we are supportive of the regulator’s intention to slow this growth to appropriate levels.”
Mortgage broker Mortgage Choice CEO John Flavell expects investors will pass on the additional costs from higher rates to tenants through increased rents, which would make it harder for the large proportion of renters who are aspiring to own their own property.
“Tenants will feel the brunt in higher rents, the tenants that were looking to use investment borrowing as a mechanism into the market can’t get access to credit and the cost of that credit has gone up,” Mr Flavell told AAP.
AMP Bank joins three of the four major banks, plus Macquarie, in lifting rates for investors after the Australian Prudential Regulation Authority set a “speed limit” restricting growth in investor lending to 10 per cent a year.
AMP Bank, a small player in Australia’s home loan market, plus ANZ and Commonwealth Bank have cut rates on some owner occupied loans.
Mr Flavell says further discounts for owner occupiers are possible.
“If lending institutions are focused on growing their mortgage footings and their ability to grow in the investment space is capped then they’ll look for opportunity in the owner-occupied space and I’d expect that the competition will heat up,” he said.
Westpac is the only major bank that has not yet hiked rates for property investors but faces the problem that its systems prevent it from increasing the standard variable interest rate for investment loans without also impacting owner occupiers.
“Our rates remain under review,” a Westpac spokesperson said.
“We haven’t had differential pricing across the mortgage book for a number of years so if this was to be introduced we must ensure a smooth transition for affected customers.”
Commonwealth Bank and ANZ have both raised the interest rates they charge property investors by 27 basis points, while National Australia Bank hiked variable rates on interest-only home loans – the predominant structure for investors – by 29 basis points.
Mr Flavell said if Westpac is unable to differentiate rates between investors and owner occupiers then it may follow NAB in lifting rates on interest-only loans.
“All the banks need to make sure their systems are able to distinguish between investors and owner occupiers otherwise first-time buyers who are young and do not have huge deposits or massive incomes are those who are going to end up being badly hit,” he said.