Westpac has lifted the maximum LVR for investment loans to 90%, up from 80% (which was below many other lenders). With the largest share of investment loans they trimmed back their lending to the sector last year in order to get under the regulators 10% speed limit. Now the brakes are off, and with refinance growth slowing, and loans to overseas investors on the nose, lenders are targetting the investment sector. Other underwriting parameters are still tighter than they were.
The Digital Finance Analytics household survey highlighted that demand from investors was on the rise, and last month there was more growth in investment loans, as investors gained renewed confidence in home price growth, and saw the prospect of negative gearing changes dissipate. The RBA’s rate cut was the gilt on the gingerbread.
Given that household lending appears to be the only game in town to force economic growth, it will be interesting to see how the RBA and APRA react to a resurgence in the more risky investment lending sector. They seem happy with a 7% annual growth in credit, a rate way higher than real incomes or inflation, meaning high household debt will go higher still.
