Australia’s banks are further tightening lending for property investment.
In the latest move, Bankwest has decided to no longer calculate the tax benefits from negative gearing when deciding whether or not to give a property investment loan.
The bank, owned by the Commonwealth, Australia’s biggest home loan lender, says its serviceability calculators have been updated to remove negative gearing tax benefits.
“This change aligns Bankwest with industry best practice and guidance from regulators,” a spokesman said.
“For customers who operate their investment property at a loss, where the income of the investment property does not exceed the costs, the related tax benefit will no longer be included in Bankwest’s calculation for serviceability of the loan.”
This effectively lowers the amount which can be borrowed because the calculation ignores tax breaks which make servicing a loan easier.
Negative gearing is where an investor runs an investment property at loss and claims that loss, the difference between rent and the interest on a loan, against other income when tax time comes around.
The Commonwealth, and Bankwest, last week suspended new lending to housing investor customers coming from another bank and wanting to refinance their loans.
The latest Bankwest decision, which impacts new applications from February 10, further dampens the market for property investor loans.
The moves are all about remaining under APRA’s (Australian Prudential Regulation Authority) 10% investment lending growth level designed to dampen demand for property loans.
APRA, worried about the exposure of the big banks to the property market, is reported to be closely monitoring the banks on their investment property loan levels.
According to housing finance figures released by the ABS, the value of lending to investors fell in December by 1% to $13.199 billion, the first monthly decline since August.
The decline could reflect caution from lenders, although further data is needed to see whether this is a one-off or the start of a trend.
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