Suncorp loosens lending guidelines

George Lekakis

Lenders have begun to remove lending restrictions on borrowers wanting to buy inner city apartments in Brisbane following a sustained recovery in occupancy rates and rental values.

Suncorp announced on Monday that it was loosening lending requirements for Brisbane apartment buyers.

“From Tuesday 3 August 2021, Suncorp will remove the current 80 per cent loan to value ratio restriction in place for inner-city Brisbane investment units to bring it into line with our current LVR lending guidelines,” Suncorp told brokers in an email.

“Customers looking to purchase or refinance investment units in inner-city Brisbane above 80 per cent LVR will now be able to do so.”

The bank’s decision coincided with the release of new data collated by Corelogic showing that the average rent on Brisbane apartments overtook Melbourne in June.

The median rent on a Brisbane unit rose 0.7 per cent in June to A$414, while the median rent in Melbourne was flat at $413.

Average rental yields in Sydney and Melbourne declined by 1.1 per cent and 6.4 per cent respectively in the 12 months to the end of June, while in the Brisbane market the same measure increased by almost 4 per cent.

Most of the major banks are maintaining tighter requirements on lending to apartment borrowers in Australia’s two largest cities amid ongoing concern with oversupply and low rental yields.

“The inner city apartment market has always been at the volatile end of the property market and it is yet to recover from the impacts of the COVID-19 pandemic,” said Canstar director, Steve Mickenbecker.

“While I suspect more investors are trying to get back into the apartment market, yields are still at historic lows and that makes lenders wary about taking on more credit risk.”

Suncorp has underperformed in the home loan market in the last two years and is now trying to reconfigure its pricing and lending policies to retrieve market share.

This week the bank also announced material increases to the maximum loan amounts available to home borrowers.

For borrowers in Queensland, Victoria, NSW and WA, the cap on loan amounts for borrowers with LVRs of between 75 per cent and 80 per cent has increased by $900,000 to $2.5 million.

The cap for mortgage applicants requesting LVRs above 90 per cent has increased by $75,000 to $975,000.

The loosening of lending policies at Suncorp comes as APRA and the Reserve Bank signal the possibility of reintroducing so-called macro-prudential measures, such as caps on lending to investment borrowers, if they conclude that lending standards are declining in the banking sector.

RBA Governor Philip Lowe noted the rise in lending to investment borrowers in a statement after the central bank’s board meeting on Tuesday.

“There has also been increased borrowing by investors,” observed Lowe.

“Given the environment of rising housing prices and low interest rates, the bank is monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”

Corelogic’s research director Tim Lawless believes the case for regulators to curb excessive lending activity is not yet strong enough.

“APRA, the RBA and the broader Council of Financial Regulators are watching for any signs of a material slip in lending standards, as well as a more substantial lift in household debt or speculative activity,” Lawless wrote in a research report published on Tuesday.

“While each of these metrics is on the rise, the level is likely to be insufficient to trigger a response from APRA.”