ANZ raises investor loan rates

ANZ has taken steps to further dampen demand for residential property investment loans, increasing variable and fixed rates on investment loans.

The bank announced yesterday that from August 10 the variable rate on its Residential Investment Property Loan would rise by 27 basis points to 5.65 per cent.

Fixed rates will rise by 30 basis points, with the three-year rate rising to 5.14 per cent and the five-year rate to 5.04 per cent.

The variable rate on an owner-occupied mortgage will not change and fixed rates for owner-occupiers will fall by between ten bps and 40 bps.

ANZ chief executive Australia Mark Whelan said in a statement that the increase in investment loan rates was designed "to manage investor lending growth targets and in response to changing market conditions."

In December the Australian Prudential Regulation Authority wrote to authorised deposit-taking institutions saying that investor mortgage portfolio growth "materially above a threshold of ten per cent" would be seen as "an important risk indicator" in considering the need for regulatory action.

In May, ANZ contacted brokers advising them that they could offer investors advertised rates only, with no discretionary pricing. Other lenders made similar moves, as well as increasing loan serviceability hurdles and, in one case, applying loan-to-valuation ratio limits.

APRA's May banking statistics show ANZ's residential property investment loan book growing at an annualised rate of 12 per cent in May and at an annualised rate of 10.4 per cent over the three months to May.

The APRA figures show that, on an annualised basis, all the big banks, except Westpac, had investor loan growth rates above ten per cent in May, and so did AMP Bank, Macquarie Bank, ME and Teachers Mutual Bank.

If the banks don't get their growth rate below APRA's limit they face the prospect that the regulator will take action.

APRA's submission to the Senate Standing Committee on Economics inquiry into home ownership outlined a number of measures it has ready in its toolkit, including "additional measures to strengthen lending standards, additional capital requirements for individual authorised deposit-taking institutions, higher capital requirements for certain types of higher risk lending and the application of counter-cyclical buffers."

APRA said it had not ruled out the use of macroprudential tools of the kind used by other countries, such as limits on high loan-to-valuation ratio lending.

It said the available evidence suggested that its December initiatives were having some success in moderating the lending behaviour of "those ADIs pursuing higher risk strategies", with the growth of investment lending appearing to have begun to plateau. However, it added that there was "still room for improvement".