Smart Property Investment has previously reported that banks including Bankwest, CBA, ANZ, NAB and Westpac have introduced a raft of changes to their serviceability and borrowing requirements for investors as regulators try to reign in investor activity.
All changes thus far have been nationwide, with SQM Research managing director Louis Christopher noting it was “interesting” that none of the banks appeared to be making geographically-targeted policy changes.
However, ING Direct has today released new loan-to-value ratio (LVR) parameters, with dramatic drops flagged for investors in New South Wales. The changes are effective immediately.
ING Direct announced it will be making changes to its LVRs both for new and existing customers for loan applications received by the bank from today.
The maximum LVR (including LMI premium) for owner-occupied loans will be 95 per cent (previously 97 per cent); for investment loans it will be 90 per cent (previously 96 per cent); and for interest-only loans it will be 90 per cent.
Loan applications involving investment properties in New South Wales will be subject to further reductions, with the maximum LVR at 80 per cent.
The document said the bank’s decision comes in response to “sustained growth in NSW property values”.
In October, Century 21 Australasia owner and chairman Charles Tarbey said introducing LVR restrictions on investors would be disastrous and immensely damage the housing market but in a speech at the Customer Owned Banking Association CEO & Director Forum in Sydney in May, Wayne Byres, chairman of the Australian Prudential Regulation Authority (APRA) said Australia needed to ensure it didn’t place its historically stable banking sector at risk.
“The current economic environment for housing lenders is characterised by heightened levels of risk, reflecting a combination of historically low interest rates, high household debt, subdued economic growth, and strong competitive pressures. Many of these features have been emerging over a number of years, and APRA’s supervision has been intensifying in response,” he said.
Mr Byres said that as “housing-related risks have potentially grown” the regulator has sought to “turn up the dial” in terms of scrutiny and management.
APRA investigations into hypothetical borrower scenarios found that “common sense was sometimes absent” when it came to the banks’ treatment of borrowers’ income sources and credit assessment processes. He also said lending standards were “a little disconcerting in places”.