AMP Bank is the latest lender in Australia to introduce more stringent loan application rules and higher interest rates for foreign property investors, as the prudential regulator’s clampdown on the property market continues to have an impact.
Among the tougher rules implemented in recent weeks by major lenders such as NAB, Westpac, Commonwealth Bank, and now AMP, include cutting the loan-to-value ratio for borrowers who rely on income abroad, and requiring face-to-face meetings with loan applicants.
AMP yesterday announced that it would be increasing variable rates for new and existing investor loans by 35 basis points at the end of this week.
At the same time, new borrowers who come to AMP for an investment loan will need to stump up a minimum deposit of 50%. Loans backed by an investment property will also be subject to the stricter restrictions.
“These measures are needed to ensure we operate within our regulatory obligations,” AMP Bank chief executive Sally Bruce said.
“We are managing our loan book in a very active market and these changes follow recent shifts in competitor activity. We will continue to take the necessary steps for sound management of our regulatory requirements,” she added.
Foreign property investors seeking to buy property in Australia have been hit by a number of measures in recent week in a bid to level the playing field between domestic homeowners and foreign investors.
The Australian government is hoping to deter many international investors from investing in the country’s housing market in an effort to stop prices spiralling out of control and help support first-time buyers in their efforts to get a foot on the housing ladder.
Residential investors, especially those who have purchased interstate property, have been hit hardest.
From 1 July, tax deductions relating to expenses incurred while visiting properties in Australia will be completely scrapped, there will soon also be a tightening of depreciation deductions for investment properties, including a plan to no longer permit subsequent owners of a property to claim deductions on items purchased by the previous owners of the property.
The government is also planning to impose a 50% limit on foreign ownership in new property developments, which the government sees as a way of ‘increasing the housing stock for Australian purchasers’.