Westpac Group is clamping down on lending to overseas property investors wanting to buy residential property in the nation’s popular residential markets.
The bank, which recently announced a reduction in loan-to-value ratios on investment loans to 80 per cent, has described the move as another measure to limit annual investment lending growth to a maximum of 10 per cent, as mandated by the Australian Prudential Regulation Authority.
The bank’s broker distribution division is writing to mortgage brokers identified as having a “higher percentage” of property lending to people not resident in Australia. They have advised to a select group of brokers that all future home lending applications that are submitted to Westpac must contain a primary application that has an Australian residential address.
That means the applicant must have an Australian visa and conform to Foreign Investment Review Board criteria. Non-residents need to obtain FIRB approval when buying property – a rule that is now being more actively enforced.
PRESSURE FROM REGULATOR
Banks are rapidly changing their rules for lending to property investors, a response to pressure from the banking regulatory to reduce the amount of investor activity in the property market.
Last week ANZ Banking Group and Commonwealth Bank of Australia both lifted their lending rates for all landlords. Earlier this month Westpac announced it would require applicants for property investment loans to have a deposit equal to 20 per cent of the property’s value, up from five per cent.
In addition, mortgage brokers claim competitive investment pricing has stopped.
Other measures aimed at reducing the demand from investors for property loans include reducing interest rate discounts, increasing interest rate “sensitivity buffers” and ruling out some types of income such as bonuses, when assessing an applicant’s ability to repay a loan.