The Commonwealth Bank hikes rates for interest only investor home loans

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On the same day it delivered a monster first half record profit of $4.91 billion, the Commonwealth Bank has announced it will hike rates for interest only housing investor loans and line of credit home loans.

“Interest only home loan rates for investors will rise by 12 basis points and Viridian Line of Credit (VLOC) products will increase by 4 basis points,” the bank said on Wednesday.

“The new interest only standard variable rate for investors will be 5.68% per annum, VLOC will move to 5.82% per annum.”

The nation’s largest lender said it “is committed to meeting its regulatory requirements while ensuring it can provide for the long term sustainability of the Australian housing market”.

The changes come into effect on April 3.

The move follows news last week that CBA had ceased lending to some new property investors citing “regulatory commitments”.

According to The Australian, the bank’s annualised investor lending rate was 10.3% in December, based on data issued by Australia’s banking regulator, APRA.

This is above the regulators 10% per annum cap for investor credit growth from an individual lender, established in December 2014 to reduce perceived financial stability risks stemming from a sharp increase in investor credit growth in the preceding period.

In recent months, there has been a noticeable acceleration in investor activity in Australia’s housing market, according to data from both the Reserve Bank of Australia (RBA) and the Australian Bureau of Statistics (ABS).

According to the RBA, investor housing credit jumped by 0.8% in December, leaving annual credit growth at 6.2%, well above the 5.6% pace of November.

It was the fastest annual increase since March 2016.

That acceleration followed data from the ABS which revealed new loans to investors came in at $13.199 billion in December, up 20% on the level of a year earlier.

And most of that increase has been concentrated in Sydney and Melbourne, the two hottest housing markets in Australia in recent years.

Prices in both cities soared by more than 13% in 2016, with average selling times falling to around a month in December.

According to the latest Property Pulse Report from CoreLogic, sales in Melbourne took just 29 days — the lowest level on record — while those in Sydney took a little longer, selling after 33 days on average.

Given the heat in these markets, corresponding with a lift in investor activity and similar restrictions being implemented by other lenders aside from the Commonwealth Bank, it suggests APRA may have stepped in to cool activity in certain segments of the market.

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