Diversified financial services company AMP Limited (ASX: AMP) has today announced that it will no longer lend to property investors from today, and will increase variable rates by 0.47%.
The company says that the action is in response to regulatory guidelines to limit growth in investor lending to 10%. New higher rates will apply from September 7, 2015, and follows moves by Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB) to raise interest rates on investor loans.
The ban on investor lending is expected to last until later in 2015, depending on market conditions. The good news is that if you are an owner-occupier and qualify for AMP's AMP bank Professional Package, you can now access home loans with interest rates as low as 4.12% per annum.
"Australia's property market is experiencing high levels of investor property lending growth and we are supportive of the regulator's intention to slow this growth to appropriate levels," said Michael Lawrence, Managing director of AMP Bank.
The Australian Prudential Regulatory Authority (APRA) has become concerned about the growth in investor loans, and speculation in the property market. The regulator has said that it would like to see growth in lending to investors drop below 10%; hence the reason lending institutions like AMP are taking action.
Property prices, particularly in Sydney have soared in the past few years while Melbourne has seen growth well above other capital cities as we noted here and as you can see from the chart below.
We've also written about this a few times in the past couple of months including here and here.
The actions by the banks may well take the heat out of the property market, but AMP is a relatively small player in the household lending market.
The problem for AMP is that many of its customers are clients of its financial planning division. That could see the financial services company lose at least some of its high-value customers.
