After months of investors bearing the brunt of APRA’s revised lending guidelines, a major bank has announced increases to both investor and owner-occupier rates, with others expected to follow suit – but what will it mean for the property market?
The head of a prominent broking firm expects ANZ, Commonwealth Bank and NAB to join Westpac in lifting their variable home loan rates, with investors and owner-occupiers unlikely to see relief from any future RBA cuts.
1300HomeLoan director John Kolenda said it was no surprise to see Westpac increase variable interest rates on residential owner-occupier and investment loans by 20 basis points.
“While the RBA’s cash rate has stayed at a record-low of two per cent since May and there are expectations of further interest rate relief before the end of the year, the central bank’s decisions are rapidly becoming redundant,” he said.
“Westpac is the first to raise rates out of cycle and other lenders are likely to follow suit.”
The impact of Westpac’s lending changes on the property market will largely depend on any subsequent movement by the other major banks, according to wHeregroup director Todd Hunter.
“It will depend on what the other banks do because even though Westpac’s a big player, one player obviously doesn't dictate a whole market. If the other banks follow and put their rates up, then you’ll probably see a slowing of investment purchases across the Sydney and Melbourne sector and maybe some other areas, and it might slightly slow up the owner-occupied side of things as well," he said.
The higher entry point of Sydney and Melbourne property means that those markets are likely to be hit hardest, but this may not be a bad thing, according to Mr Hunter.
“So I don’t think it’s going to completely halt a market, but it will put a bit of a sting in the side, and maybe make people think twice before they do something. Which is probably not a bad thing, they probably need to do their due diligence a bit to make sure they can afford to buy the property, and [that] if the repayments jump, they can afford to buy it,” he added.
According to Mr Kolenda, any decision by the other big four banks to join Westpac may put pressure on the RBA to cut rates at its next meeting.
“This may force the RBA to cut rates when it next deliberates on Melbourne Cup Day, but its cuts are likely to be negated by the actions of the major banks, which face additional compliance and provisioning costs.”
Mr Kolenda added that further rate relief from the RBA might not be passed on in full by lenders, and rates could increase across the board due to pressure on the major banks to meet APRA’s capital requirements by mid-2016.
Despite both products being raised by 20 basis points, owner-occupier lenders will still receive lower interest rates than investors with Westpac once the changes are enacted on 20 November.