A major bank and it’s subsidiary have recently halted lending to property investors who wish to refinance their loan. Which bank? Commonwealth Bank. Yes you know – the bank that’s been around for squillions of years and we should know as we all likely held a Dollaramite account with them in year 6.

We can’t say we’re all that surprised. CBA only a few weeks earlier had notified us they were reducing their interest rate discounts for investors (meaning higher rates for investors) which we suspected was a ‘softly softly’ approach to try and slow down their investment lending.

Why?

Check out my previous blog post here on banks regulatory changes. Fast forward 18 months and we still have house prices (and investment debt) spiralling out of control. Any dampening effect from the initial changes to investment loans in 2015 has well and truly worn off however APRA’s stance most definitely has not. There is now even more pressure on banks to tighten investment lending to stay within the regulators thresholds.

So why has CBA taken this sudden and somewhat drastic approach?

CBA were a main contender in the market a year ago, offering unheard of discounts on their home and investment loans right around the time when other lenders were pulling back. So it’s no surprise their investment lending soared as more and more investors chose to refinance their loan to CBA to get a better deal.

They’ve now reached their peak as far as the regulator is concerned and rather than risk a slap on the wrist from APRA they have chosen to halt all investor refinance lending for the time being. That being said, if you have an owner occupied home to refinance along with an investment property they will still accept your business however for those with an investment only portfolio it’s time to find another bank.

Bankwest (who is owned by CBA) also recently stopped accepting new business from customers seeking to refinance investor home loans and then in a double blow a week later removed negative gearing tax benefits from their serviceability calculators – meaning that the ability to service a loan for some investors may become more difficult.

These tactics are not uncommon for banks, and I’ve seen many in my 10 years as a mortgage broker. Although it’s rare for banks to ever come out and actually STOP lending to certain customers, they turn the tap on and off in many ways to attract or detract the type of business they want. In CBA and Bankwest’s case, whilst they’ve stopped lending to stand-alone investors, they are still technically open for business to investors who also have a home loan… although their rates suggest otherwise. They are positioning themselves as too expensive in the market and too hard serviceability-wise to approve a loan. So, investors tend to go elsewhere which is their desired outcome at present.

This is a temporary measure until their investment lending returns to comfortable levels. It will no doubt change, as things inevitably do in the lending industry. Banking is extremely competitive and what we’ll see now are other banks (with satisfactory levels of investment lending according to APRA) stepping up to the plate to gain a slice of the pie that CBA and Bankwest have left at the table.

We’ve received confirmation and reassurance from other lenders that their lending levels are fine and they most definitely are “open for business”. If you are an investor, contact us today for a review of your investment portfolio to make sure you’re with a lender who is open for YOUR business.