What happened? Hot on the heels of announcements from Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd. (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) on Thursday released a statement confirming that the bank would also only offer advertised rates with no discretionary pricing available to investor loans.
ANZ’s move came on the same day as Commonwealth Bank of Australia-backed lender Bankwest announced that it would start capping investor loans at 80% loan-to-value (LVR) ratio and only days after National Australia Bank flagged a reduction in the discounts offered to investor loans following the Australian Prudential Regulation Authority’s (APRA) request to keep investor loan growth below 10% per annum.
What does it mean? ANZ is less exposed to the residential property market than peers Commonwealth Bank and National Australia Bank, however bubble fears have prompted the bank to ensure that its portfolio grows “in a balanced way”.
The policy changes are a warning to investors and mortgage brokers that times are going to get tougher as APRA works together with the RBA to ensure that the local housing market doesn’t get overheated in this period of low interest rates.
This could also be a bad sign for ASX-listed financial services and mortgage broking firms like Yellow Brick Road Holdings Ltd (ASX: YBR), Homeloans Limited (ASX: HOM) and Mortgage Choice Limited (ASX: MOC), however there will be opportunities for switched-on groups.
What now? The banks are choosing to increase their safety buffer so that they can absorb any future falls in the property market. Analysts and sector experts are predicting that this could mean the end for the out of control property price increases of the last four years.
I expect we’re going to see a very interesting period for residential lending. Some banks, perhaps regionals like Bank of Queensland Limited (ASX: BOQ) and Bendigo and Adelaide Bank Ltd (ASX: BEN) or securitised lenders including Aussie Home Loans and Macquarie Group Ltd (ASX: MQG), could steal considerable market share from the big four banks as their highly leveraged lending is restrained.
It’s interesting to note that while Sydney and Melbourne house prices have surged 15% this year and nearly 50% since 2011, prices in Queensland, Adelaide, Perth and Tasmania have been far more subdued. This variation makes action by the banks and APRA difficult and puts more onus on other industry players like valuers and mortgage insurers to get it right in the quickly-growing suburbs.
What will happen? Who knows! But, investing in property has been as nearly as good an investment as shares over the long term. Both have been through corrections and how you deal with those situations can often dictate your returns.
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