CBA has announced changes to its investment loan pricing. Like ANZ, which we covered yesterday, the price rise applies to existing as well as new investment loans, which means that the move, whilst ostensibly connected with APRA’s 10% growth hurdle actually has more to do with the changing capital requirements which were announced this week and the ability to offer keen rates to attract new owner occupied loans (which are not caught by the 10% cap).
Commonwealth Bank has today taken further steps to moderate investor home loan growth and to manage its portfolio to address the Australian Prudential Regulation Authority’s concerns regarding investment home lending growth. The interest rate on investor home loans will increase by 27 basis points to 5.72% per annum. Fixed rates for 1,2,3,4 and 5 year new investor home loans will also increase by between 10 and 40 basis points. There are no increases to the SVR on owner occupied loans and fixed rates for some owner occupied loans have been reduced.
Demand for investor home loans across Australia has reached historic highs, with recent data noting that over 50% of new home loan approvals are for investment purposes. Last December, APRA introduced new regulatory measures to reinforce sound residential lending practices, including actions to restrict investor lending growth to no more than 10% p.a.
Matt Comyn, Group Executive for Retail Banking Services said: “As Australia’s largest home lender, we support the prudential regulator’s actions to ensure lending practices remain sustainable and we have been actively managing our investment home loan portfolio to remain below the 10% growth limit.
“Despite making a range of changes to our investor lending policies in the past few months we have witnessed ongoing investor lending growth, and at an industry level, investor lending approvals remain 22% higher than 12 months ago.”
Commonwealth Bank has moved to ensure it remains competitive for owner occupied loans and we have reduced rates on our 1,2,3, and 4 year fixed rate loans by up to 30 basis points. These fixed rate changes came into effect this week (22 July 2015).
“In the current market conditions, we believe these changes strike an appropriate balance in our portfolio between owner occupied home loans and those seeking investment loans,” Mr Comyn said.
Fixed rate loans for investors will increase by between 0.10% and 0.40% . This will apply to new loans only and will come into effect from 31 July 2015.
The new investment home loan rate of 5.72% remains one of the lowest rates offered by CBA and is 0.18% lower than the rate six months ago. It will apply to new and existing customers and will come into effect from 10 August 2015.
We expect the other majors to topple into line, so moving pricing of investment loans higher. Some fixed owner occupied rates are cut, so CBA is re-balancing its portfolio. Now of course the question will be, does this translate into dampening demand for investment property, as the RBA hopes, or does it simply lift the interest costs which can be set against tax, (remember many investment loans are interest only). Given the significant capital appreciation we have been seeing lately, and that fact that rates are low (as low as ever) we suspect demand will still be there. It is conceivable as this works through the RBA may have more wriggle room for another rate cut, but we are not so sure.
