RBA decisions losing relevance: John Kolenda
GUEST OBSERVER
The Reserve Bank of Australia (RBA) is rapidly losing relevance to mortgage holders amid a myriad of changes to the nation's home loan landscape to tackle concerns about investor lending.
While the RBA maintains its cash rate at a record low of 2.0% – where it has been since May this year - tens of thousands of borrowers have already been hit with increases to their mortgage rates.
The decision of many lenders to raise interest rates for investment and interest only loans as well as revised borrowing conditions means the RBA's rate deliberations have become almost irrelevant for some borrowers.
While there is some competition in the market for owner-occupied loans at the moment due to the restrictions on investor loans, this pricing will be short lived with the pressure on the major banks to meet Australian Prudential Regulation Authority (APRA) measures by June next year. We will likely see rates increase for owner-occupied in the future.
The actions of the banks to increase rates in response to industry and regulatory desires to tackle the growth in investor lending due to concerns about booming Sydney and Melbourne property prices has changed the lending landscape.
Despite the RBA keeping its cash rate on hold, thousands of borrowers have been notified already by their lender that their interest rate will go up by as much as 49 basis points.
In the history of home loans it has never been more confusing for borrowers, who now need to be better informed than ever before.
Not only are rates for investors and people on interest only loans being targeted, there is a great variation now for all those looking to borrow money for investment purposes. Any investor who has purchased should revisit their approval as lending conditions have changed dramatically.
There have also been changes to loan servicing calculations, Loan to Value Ratio (LVR) requirements as well as the rental income needed to help service a loan.
John Kolenda is managing director of 1300HomeLoan and can be contacted here.
